< The 2014 All-America Research TeamKevin St. PierreSanford C. Bernstein & Co.First-place appearances: 1
Total appearances: 10
Team debut: 2005In his strongest showing since 2009, Kevin St. Pierre of Sanford C. Bernstein & Co. leaps from runner-up to second place. Pointing out that the “harsh” interest rate environment is responsible for net underearnings at U.S. midcap banks, St. Pierre says that his group will be able to make its way back to a return on equity of 12 to 14 percent over the next few years, as expanding margins overpower rising loss provisions. What’s more, he notes, to justify keeping their money in the sector, investors will expect to see loan growth and a return of capital. This will happen, St. Pierre contends: As the economy continues to improve, credit demand will increase; and as the banks continue to heal, the U.S. Federal Reserve will relax its tight control on excess capital, which in turn should allow the banks to return more capital to shareholders. The analyst’s favorite player is Capital One Financial Corp. Conservative estimates for loan expansion and loss provisions for the McLean, Virginia–based concern are likely to be positively revised in the near term, he believes. Further on he foresees premium growth and profitability eventually warranting a superior multiple, as a shift in consumer borrowing behavior benefits Capital One’s high return on equity credit card business. “Since a lot of home equity has been destroyed, and banks are far less willing to let their customers lever up on the house,” explains St. Pierre, mid- to low-end consumers are taking on leverage by increasing their use of credit cards rather than tapping home equity lines as they had done over the past two decades.