Battle of the bank analysts

As if Wall Street analysts didn’t have enough critics to contend with these days. Now two of them are feuding.

In one corner: Tom Brown, the feisty hedge fund manager and former sell-side bank stock follower. In the other: Mike Mayo, Prudential Financial’s headlining bank analyst.

Last month Brown, who believes bank stocks are oversold, lambasted the bearish Mayo on his popular Bankstocks.com Web site: “I can’t recall a time in the past 20 years when I’ve disagreed with another analyst as emphatically, and in such detail,” Brown wrote. “Mike may be smart, but I fear he has been caught up in the downbeat emotional climate of the times.” Brown slammed a recent Mayo report for making no mention of valuation. “How in the world, at the depths of one of the longest, most severe bear markets in history, can he pay no regard to what negative news investors might already have discounted in the stocks’ prices?”

Responds Mayo: “I’ve gotten backlash and cheap shots for the past four years, so I get pretty immune to it. I’ve done about 4,000 pages of research over the past four years to describe concerns that we’ve had. Either you read the research and you like what I say or you don’t. And that’s what makes a market.”

In the past Brown and Mayo have courted controversy with their often negative -- and never sugarcoated -- outlooks. While at Donaldson, Lufkin & Jenrette in the 1990s, Brown was famously barred from First Union Corp. headquarters by the bank’s former CEO, Ed Crutchfield, who tagged him “that red-haired boy” during one heated exchange. And Mayo elicited howls from big money managers, as well as salespeople at his own firm, when he turned negative on bank stocks in May 1999 after years of bullishness.

Both were fired from their previous sell-side employers after rankling the same set of investment bankers. Brown got pushed out of DLJ in 1998, after the firm hired a team of high-powered bankers from UBS Securities who worried that his combative style would compromise client relationships. Two years later Mayo’s Credit Suisse First Boston acquired DLJ. The bankers groused again, and Mayo was shown the door. He joined Pru, which has no investment banking, a few months later.

Tale of the tape
Name Tom Brown Mike Mayo
Nickname “Red-Haired Boy” “Jerry Maguire of Research”
Bestower of nickname Ex,First Union CEO Ed Crutchfield Mike Mayo
Age 43 39
Firm Second Curve Capital Prudential Financial
Years in business 21 11
Best II ranking No. 1 in regional banks, 1989, 1990, 1992,1997 No. 1 in regional banks, 1998
Previous sell-side job Donaldson, Lufkin & Jenrette Credit Suisse First Boston
Reason for leaving Investment bankers, frustrated with his bearish calls, had him pushed out Investment bankers, frustrated with his bearish calls, had him pushed out
Signature call First Union Corp., 1997: “Avoid this serial diluter” Nailed the top of a long bull run for bank stocks with his May 1999 downgrade of the sector
Current sentiment Banks are undervalued: Buy Take the money and run: five sell ratings, 13 neutrals, no buys

Related