morningstar = sell side on 2 lbs of purple

Analyst Note 09-29-2008 | by Matthew Warren We’re placing First Horizon FHN, KeyCorp KEY, Fifth Third FITB, Provident PBKS, Newcastle NCT, and Bank of New York BK under review to re-assess our assumptions in light of the rapidly changing environment. ------------------------------------------------------------------- EH??? why do I even pay for this crap. 2 weeks from now after a bank explodes, they’ll “remove coverage”

Bank of NY blowing up would be interesting.

Yeah, I am not even sure what BONY does anymore. arent’t they a trustee / transfer agent / asset management house now? sold off all their branch / deposits bus to chase? can’t imagine they have bad loans or capital issues right now, but could be wrong. i think their current model is pretty low risk.

FHN was up 20% today

BoNY and the other trust banks bear risk through their massive securities lending programs. They lend out stock in custody and take 102% cash collateral. They then reinvest that cash collateral in (supposedly) low-risk vehicles, passing on some of the interest to the borrowing broker, some to the client who owns the stock, and keeping some for themselves. The investment portfolio is run similar to a money market fund. They bear some ALM mismatch risk and often indemnify clients who participate from losses on collateral. To the extent that people got aggresive with their collateral reinvestment, they could now be on the hook for losses given the status of the money markets. Concern over this is why STT, NTRS, and BK sold off after the Primary fund broke the buck.

M* recently made internal changes because the company was not satisfied with recent analyst performance in the financial sector. i interviewed with them and busted them on why virtually every single bank/asset manager was rated a 5-star stock (when the sector was 200% higher than it is today). how can every player in the same industry have a “wide moat” as they like to call it? they are too formulaic and i think they know it and are trying to adjust their framework.

NO wonder op express cancelled their contract w/em.