A slew of banks and other financial firms reported earnings on Wednesday morning and traders were encouraged by an improving credit trend in Bank of America and others. David Katz, chief investment officer at Matrix Asset Advisors, shared his insight on the sector.
Katz said while the big banks, such as Bank of America , had a difficult quarter, credit trends peaked last quarter.
“If you look at today’s earnings, the trust and processing banks did well—better than expected,” Katz told CNBC.
“We think there’s some clear sailing for 2010 and we think the worst is behind them—and the stocks are reacting.”
“They’re entering 2010 with a strong balance sheet and you’re going to have the wind at their back as the year progresses,” he said.
Katz said he likes Goldman Sachs because management has done “everything right.” As a result, it sells at a premium to the financial group.
But he has a caveat.
"There are better opportunities to make more money,” he said. “They’re doing too well and can’t continue to do that well, or that much better than names like Morgan Stanley, indefinitely.”
Meanwhile, Katz said he is disappointed by Morgan Stanley’s decision to allocate 62 percent of revenue to pay employees in 2009.
“The whole compensation structure on Wall Street—the companies are paying people while the stocks haven’t recovered yet—so we’re frustrated by that,” he said.
“We’ve learned in investing in the brokers that they’re going to pay their employees a lot of money, but the shareholders are going to make a lot of money too. So at this point, we’d like for the shareholders to start making money as well.”
- Watch Katz's Previous Appearance on CNBC (Jan. 14, 2010)
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Matrix Asset Advisors owns and continues to buy shares of BAC, MS, STT, and BK.