Tuesday, February 16, 2010

Financials Update 02.16.10


· Financials: Trading in-line with the broader tape, financials are rallying on a series of headlines including Barclay's earnings, a cancelled strike from Greece's tax collectors, better-than-expected master trust data from the card companies and a NYTimes story stating that the EU is cooling to the Volcker Rules. Volumes are lighter, as are flows this morning. However, we maintain a bias to the buyside which we shifted towards mid-last week. Vanillas remain skewed to the buyside following two weeks of aggressive selling, while HFs remain better to buy as well following two weeks of a more balanced approach. For both vanillas and HFs, we're seeing them play a more positive directional bias after a more market-neutral approach over the past two weeks. In banks, we're seeing vanillas adding to positions in the money centers, and value buyers continuing to show a bid at a slight discount to the current market in the larger regionals. Small cap banks are better to buy as well, as we're seeing HFs cover shorts in these names. In the credit cards, we're seeing institutional buyers of the group as master trust continues to roll out. In insurance, we're seeing a buy-side bias from HFs.

· Asset managers – strength across the board in the group. JNS is leading the traditional names, up ~4%. AB, EB, CLMS, FII, IVZ, and WDR are all up ~2%+. The alternative managers also have a bid – BX, GLG, OZM, FIG are all up ~2%+.

· Banks – trading higher across the board. BAC and C are up ~2-3% and outperforming. Regionals are more mixed but also have a bid – FITB, MTB, MI, TCB, USB are some of the better performing regionals.

· Credit cards COF is up more than 3% and outperforming after this morning’s master trust #s came in better-than-expected. AXP and DFS also have a bid to them.

· MI/financial guarantors – PMI is off 6% after earnings this morning came in below the St although the rest of the group is trading higher.

· Best Performing SP500 financials (from Bloomberg): JNS, COF, AIV, HCP, BAC, CBG, IVZ, C, ICE, ALL

· Weakest performing sp500 financials (from Bloomberg): BRK’b, LNC, TMK, AOC, ZION, NYX, FHN, CMA, MCO, BBT


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