How should investors position themselves in the banking sector in the wake of last month’s financial regulatory bill? Gerard Cassidy, banking analyst at RBC Capital Markets, shared his insight on financials.
“We expect over the next 5 years, we’re going to lose another 1,000 banks through consolidation,” Cassidy told CNBC.
“Traditional M&A is going to pick up significantly next year because of this challenge with the interest rate environment.”
Therefore, investors should look into buying some of the leading candidates such as KeyCorp, Suntrust and Webster Financial, said Cassidy.
Cassidy also likes the big and medium-big banks, including:
- Bank of America ,
- JPMorgan Chase ,
- Wells Fargo ,
- USBancorp and
- PNC Financial ,
because he believes they are likely to increase their dividend payout ratios in the next few years to almost 30 percent.
However, Cassidy cautioned that more bank failures are on the horizon.
“When you look at the bank failures, we have a problem with the regulatory agencies—they’re not staffed up to be able to close down the banks as quickly as they should,” he said. “So you should see that there are still hundreds of bank failures left. But most of these will be the community banks around the U.S.”
Scorecard—What He Said:
- Cassidy's Previous Appearance on CNBC (Mar. 11, 2010)
Market Views—Across the Board:
CNBC Data Pages:
Cassidy does not own shares of JPM, PNC, USB, BAC, Key, STI or WBS.