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Prudential Pounds the Banks Again

Eileen Kinsella

Prudential's bank team kicked off coverage on mid-cap banks Tuesday with more of the straight talking it did on the big bank names last week.

Bank analyst David Trone, who joined the firm alongside Michael Mayo in early February, is also a former Credit Suisse First Boston bank analyst. Like Mayo, Trone also left CSFB following its merger with Donaldson Lufkin & Jenrette. Today Trone initiated coverage of 15 banks, slapping sell ratings on nine, and strong buy ratings on six.

Unlike last week's research, which took a contrarian view of many of the large banks (for instance, Mayo put a sell rating on industry favorite Bank of New York (BK Quote)), Trone's research seemed more in line with what others on Wall Street are saying.

Beverly Hills, Calif.-based City National (CYN Quote), which was started as a strong buy, won kudos from Trone for its focus on "higher-margin customers that pay for high-touch service. This allows the company to avoid building scale, and still compete in its niches," said Trone.

More Straight Talk on Banks from Prudential Nine Banks Rated Sell
	Rating	Tuesday Stock Move	Recent Price
AmSouth ((ASO Quote)ASO:NYSE)	Sell	-4c	$16.60
City National ((CYN Quote)CYN:NYSE)	Strong Buy	-11c	$36.15
Cullen-Frost ((CFR Quote)CFR:NYSE)	Strong Buy	-1c	$34.66
Compass Bancshares ((CBSS Quote)CBSS:Nasdaq)	Sell	-25c	$21.00
First Tennesse((FTN Quote)FTN:NYSE)	Strong Buy	-11c	$31.25
First Virginia ((FVB Quote)FVB:NYSE)	Sell	-68c	$43.17
Hibernia ((HIB Quote)HIB:NYSE)	Sell	+86c	$13.66
Huntington ((HBAN Quote)HBAN:Nasdaq)	Sell	-13c	$14.38
Mercantile Bankshares ((MRBK Quote)MRBK:Nasdaq)	Strong Buy	-19c	$37.44
National Commerce ((NCBC Quote)NCBC:Nasdaq)	Strong Buy	+25c	$24.38
Pacific Century Financial ((BOH Quote)BOH:NYSE)	Sell	-32c	$20.05
Regions Financial ((RGBK Quote)RGBK:Nasdaq)	Sell	-31c	$29.30
SouthTrust ((SOTR Quote)SOTR:Nasdaq)	Strong Buy	-81c	$43.25
UnionBanCal ((UBl Quote)UB:NYSE)	Sell	+25c	$26.10
Union Planters ((UPC Quote)UPC:NYSE)	Sell	-53c	$36.50
Source: Prudential.

Similarly, Lehman Brothers bank analyst Brock Vandervliet upgraded the stock to strong buy last week, noting its high-quality franchise and "excellent long-term prospects due to its market niche." City National was off 21 cents at $36.05.

Among banks that received sell ratings, such as Hibernia (HIB Quote) and UnionBanCal (UB Quote), it's no secret that both Hibernia and UnionBanCal have struggled with credit quality in recent months.

Still, the report did offer a bit of vinegar on a few subjects: Regarding First Virginia (FVB Quote), rated sell, Trone said the name should be "more like 'Last Virginia Bank.'" On AmSouth (ASO Quote), also rated sell, the analyst intoned, "Thank you, Alan, may I have another?" addressing the bank's sensitivity to interest rates.