Sandler O'Neill & Partners, which has covered middle-market financial institutions, is expanding its research to include the biggest banks with the hiring of Kate Blecher, a former Brown Brothers Harriman & Co. executive.

"Our investors had asked us to broaden our scope to not only give them the investment ideas they were used to seeing, but they would also like to see our opinion on the more actively traded companies," said Fred Price, a principal in the New York firm. "Kate is an extremely well-respected and well-known analyst on larger-cap names and will immediately give us recognition."

Sandler O'Neill's move came as the merger mania surrounding smaller banks is cooling, but Mr. Price expects that a "good portion" of the smaller banks will remain merger targets. Stepping up coverage of the larger banks will help the firm understand the companies it might be observing as buyers of the smaller banks it typically represents, he said.

Public offerings and merger/acquisition work has decreased, but Mr. Price expressed confidence for the long term: "Our expectation is that the stronger the voice we have in equity research, the more effective will be our abilities to work with IPOs, whether the market is good or not good. It enhances our abilities across all our business lines.

"From a pure business point of few," he said, large financial institutions "have greater trading activities as well," which demand the attention of researchers delivering investment information.

Ms. Blecher said the list of banks she will cover is still to be determined but will probably include the companies she has been dealt with at previous jobs, including Bank of New York Co., Wells Fargo & Co., and First Union Corp.

Sandler O'Neill came out with a report this month on Mellon Financial Corp., and gave the Pittsburgh bank its highest rating: "buy."

Mr. Price said he and Ms. Blecher share the view that earnings - not just credit quality - determine share price. "One of the reasons why we are so excited about Kate joining us is because she brings a particularly strong earnings approach," he said.

Ms. Blecher said she had several offers but decided to work for Sandler O'Neill because the job allows her to be "part of a firm that is expanding." She also said she likes the idea of working for a firm that specializes in financial services companies.

Though she emphasizes earnings in her analysis, Ms. Blecher acknowledged that bank stocks are interest sensitive. "Whether that has a legitimate basis to it or is an investive deception, the fact they do move [in interest rate events] cannot be discounted," she said.

Banks with high-quality earnings and the ability to make money regardless of rate moves "will command the highest multiples," Ms. Blecher said, adding that she would "focus on those companies that have outperformed [other banks] over the past couple of years."

"We have the vast majority of rate hikes behind us," she said. "As banks have historically outperformed before interest rates have peaked, we should see improved stock prices for the major regionals, and the earnings of the companies should remain solid."

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