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Banking on the Fed the Federal Reserve set to release -- one of its bank stress tests later this afternoon regarding those big Guggenheim partners managing director.
Joins me right now -- -- you know you say overall that all nineteen banks should do well.
But let's talk about Citigroup the poster child of what not to do.
During stress tests last year how -- feeling this year about Citigroup without Vikram Pandit.
Well we believe that Citigroup.
Has side kind of learned its lesson as Bank of America did the year before.
And that what we'll see is a more conservatives posturing as they -- win.
-- really looking at being able to maximize the dividends.
-- that they can get an approval.
Which we think is really a watershed event of this year seek car.
Is the dividend yield for the bank group as a whole to be able to generate a one percentage point yield advantage to the S&P 500.
For the first time since we really came into the you know out of their financial crisis and the recession.
Marty still -- wanna bring our different Matt McCormick the ball and -- -- his investment counsel portfolio manager there and and that is actually -- satellite trouble with Matt.
Marty -- you know all right and I saw the value out what's up for -- -- Let's talk about this because -- -- I was just looking at the sector looking at how the socks are dreading an overall the big names.
Are doing well but you know if you talk to Matt who's got satellite problems he -- -- -- -- taken profits and Bank of America and Goldman Sachs summary silly backed.
He's saying he wants to get out of those big banks.
And go to those regional names Marty -- can't -- right now but I'm as big form what do you make of that.
Well we really have an investment thesis that's not based on size.
Totally based on two things that we really have one is still -- recovering banks like -- and Citigroup.
You'd mentioned KeyCorp -- have Regions Financial.
Those are banks that have been trading still at or below tangible book value we think that's from -- -- value and they've been doing really well so far this year.
We think -- KeyCorp in Citigroup would be the once again some -- As they get their loss content in the stress test.
Real reflecting better results this year and that we think -- remove an overhang that's been on the stock since last year's our results came out.
The other -- out of the thesis is really related to the high quality growth -- -- Which haven't gotten the -- lose this year but we think the -- car in the dividend yield the you can see -- BB and C.
Wells Fargo or JPMorgan.
Can get their dividend yield above 3%.
Which in and of itself to be a positive catalysts for those high quality growth you names that we.
Good morning you don't -- great -- -- -- but you don't worry that the Fed is gonna have something to say about that I think as the big fair and one of the reasons many analysts are -- gonna get some volatility in the bank sector over the next week because the Fed is doing what they're doing and that splitting it up.
Today we're gonna find out about whether or not they can weather a financial storm and economic storm next week we're going to be talking about.
Dividends and capital.
Capital cushions -- -- up on stuff but in that week of speculation and frankly.
This could be back for these for these names we've got a financial sector that that did so well -- 2012 gain 30%.
You know all bets may be off in the next spot trading sessions when he Saturday.
Well but really when you're looking at today's announcement the Dodd-Frank announcement is really about the stress -- losses.
And last year we had a by two and a half percentage point haircut related to stress tests losses.
What -- be looking for is did that number change meaningfully.
If they didn't capital ratios are up a half a percent to a full percentage point for most of these banks.
And for the more of the -- more troubled banks like regions are Bank of America they've increased their capital ratios by two full percentage points.
So we're moving on the positive side of the capital side if we don't see meaningful increase -- stress losses.
The quantitative side of this size sikar isn't gonna have the teeth and even -- had last year because of improvements and capital that the -- been all the make.
You know Marty and know that you're you're looking at -- bank -- -- -- -- you're saying this is a bank by bank story where.
-- and partially can be hair was saying that you know -- say go for regionals and forget the big names but -- as a bank I've banks story Marty.
Anyone names that you would be concerned about.
In the next week with these two rounds of stress tests coming from the -- but one name that's on your radar not a good one.
-- he -- what we moved say is that.
I don't know -- can't avoid the question not answered specifically because there's this wild card -- this whole process.
If you're looking at the numbers there's no in the analytical side says -- we're mostly a pass on.
All of the banks it really comes down to the qualitative side of this test.
In the qualitative side comes back to the risk management expertise.
The processes in place the way that they talk to their boards.
These are very individual things that they're -- -- talk -- -- person -- present to the regulators -- so there's no -- to -- that.
That qualitative side -- -- we might see one of these banks -- up in the Mulligan that the -- giving them.
We think at the end of the day -- eventual results will won't see any banks fell this year.
Mart and the -- -- it -- not finance the question but showed up to let doesn't invest part mart let me thank you so let's -- down the other shut banks might.
Thank you yes.
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