Fixed-income analyst David A. Hendler sometimes comes across as eccentric - and that's just the way he likes it.
"If I'm memorable, then people will say, 'Hey, I remember that guy. Sometimes he's right; I'd better listen to him,'" said the director and head of corporate debt research at Smith Barney.
Like other bank bond analysts, Mr. Hendler spends a lot of his time thinking about consumer credit quality and industry consolidation. Atypical in the staid world of financial analysis are the sarcasm, colorful language, and allusions to popular culture he uses to put across his views.
"Basically, we're seeing a bank version of Power Rangers," said Mr. Hendler, in a typical remark about bank mergers. "All these banks are becoming money-center-zoid beings, which will give them the market share and product brand names to dominate."
A fixed-income analyst since 1987, Mr. Hendler also has worked as a stock analyst. At one point, he went from Drexel Burnham Lambert to J.P. Morgan - a move he describes as going from the "far left to the far right."
Mixing his personal style with cogent analysis typifies and distinguishes Mr. Hendler's work in the business, said a former trader who worked with him.
"David is a top-notch analyst with a style all his own," he said. "You either love him or you hate him."
For this trader, Mr. Hendler was easy to work with because he stood firmly behind his analysis, taking the credit when it was deserved, and the heat when he was wrong.
A self-described contrarian and idea man, Mr. Hendler said he currently thinks bonds at credit card specialists like MBNA Corp. are cheap.
Although MBNA carries a BBB+ rating from Standard & Poor's, Mr. Hendler views the company's bonds as being about five to seven basis points on the cheap side, relative to treasury bonds of comparable maturity.
"Rating agencies are too mechanical," said Mr. Hendler. "They believe diversification is a product line phenomenon. I believe it could be geographic and by affinity group."
Indeed, Mr. Hendler said banks that are not brand leaders in credit cards will have above-average loss exposure should the credit cycle shift. "Companies like MBNA and Citicorp will probably do better than the average when the credit cycle turns, because their brands and technology are strong."
Mr. Hendler's presentation gets good reviews from the investor community.
"He's timely, relevant, and concise, which you need to be to get one's attention in this business," said Andy Aran, the director of corporate bond research at Alliance Capital.
Since the consolidation trend has had a positive effect on bank bonds, the bond market has been fixated on the next merger.
And, along with other financial analysts, Mr. Hendler has been trying to identify the next big pairing.
"You've got to be a strategic yenta," said Mr. Hendler.
Mr. Hendler thinks Charlotte-based NationsBank Corp. would do well to purchase a California thrift, particularly Great Western Financial.
With a strong presence in Florida, Great Western "fulfills a lot of strategic advantages for NationsBank."
The West Coast thrift would be cheaper than a northeastern bank, and would preserve NationsBank's reputation as a disciplined acquirer, said Mr. Hendler. In addition, the acquisition would give the bank a beach-head in California.
Along those lines, Mr. Hendler said Citicorp would gain some strategic benefit by buying Riggs National Corp. in Washington, D.C.
It makes strategic sense, he argues, for Citicorp to have a physical presence in the political capital of the world.
Like other potential takeover targets, Riggs has shored up its balance sheet, rebuilt capital and reserves, and focused on local banking through divestitures of extraneous foreign subsidiaries, but lacks a strong earnings backing, said Mr. Hendler.
Riggs' takeover potential has encouraged investment by Mr. Aran of Alliance.
While mergers between banks have dominated the headlines lately, Mr. Hendler said the stories in the not-too-distant future will involve a host of other financial companies.
"Changes in Glass-Steagall will affect all financial players," said Mr. Hendler. "You can't just be a bank analyst in the future. You'll have to be a financial institutions analyst."
To that end, Mr. Hendler has been building his repertoire of companies he follows to include broker-dealers, finance companies, and insurance companies.
"We may have to combine forces with those that are adept at other analysis," said Mr. Hendler.
As the lines between various financial institutions blurs, it's important to understand "who has the competitive advantage and who doesn't," said Mr. Hendler, "so that you're better prepared for the mega- zoidal trends."
