Joseph C. Duwan enjoys an expansive view of the New York metropolitan area from his office on the World Trade Center's 85th floor - but it is not nearly as expansive as the territory he covers as a regional bank analyst.
Mr. Duwan's turf extends westward from Mellon Bank Corp. in Pittsburgh to Norwest Corp. in Minneapolis. In between, the Keefe, Bruyette & Woods senior vice president follows 28 banks with market capitalizations ranging from $37 billion to $500 million.
But as vast as his coverage is, Mr. Duwan is remarkably consistent. American Banker's annual Wall Street Sharpshooters survey ranked him No. 1 at forecasting the earnings of regional banks last year - providing precise information that is critical to investors who use rising or falling net income patterns to make purchase decisions.
Mr. Duwan is low-key about his accomplishment. At an interview to discuss his ranking, he shared the spotlight with his associate, Brocker C. Vandervliet, an assistant vice president at Keefe, Bruyette.
Like other analysts, Mr. Duwan goes well beyond making earnings estimates and relishes the opportunity to bore deeply into each institution. He attributes some of his skill to having worked for a time with Keefe, Bruyette's investment banking arm, "the other side of the Chinese wall."
As a result, he is as comfortable gauging takeover prospects for community banks as he is evaluating streamlining efforts at superregionals.
Recognizing that many banks have diversified well beyond their traditional roots, Mr. Duwan now routinely meets with business unit heads in addition to his standard visits with chief executives and chief financial officers.
Anything "to get a better understanding" of what's presented on paper, Mr. Duwan said.
What makes a bank attractive to him? Certainly the numbers must be good but there are also anecdotal indications.
His top picks - Banc One Corp., Mellon Banc Corp., U.S. Bancorp - all put forth positive signals, Mr. Duwan said.
"A good analyst can look for the nuances in what management is saying," to get a feel for commitment to growth and the company's future, Mr. Duwan said. That ability and hard facts like revenue growth and loan quality can present a pretty full picture of an institution.
In addition to being bullish on the banking industry, Mr. Duwan has high words for its executives, who have earned their stripes over the past decade.
Good bankers are "optimally managing their capital ratios instead of just building up assets," he said. "Also, there's been a mind-set change that not all assets need to be held on the balance sheet."
The industry itself is benefiting from bankers who have "improved their acquisition integration skills," he said.
Mr. Duwan favors executives who are "dedicated to shareholder value" and who demonstrate that commitment by owning shares themselves.
He also favors banks that are serious about developing cultures in which employees are paid for bringing in business.
Mr. Duwan, like his peers, is always on the lookout for takeover targets, but his endorsements are conditional. There must be upside potential for shareholders at the target bank.
And, the acquirer must be realistic in its projections, he said. "We're watching carefully the increased level of cost savings promised in the transaction. You can probably attain whatever level you'd want, but if you cut too deeply, you run the risk of service issues or customers walking out the door."
Market forces will cause the merger wave to continue, he said. "There is still no industry as fragmented as banking."
Certainly Mr. Duwan's colleagues speak highly of his prowess and professionalism.
"Joe is very thorough in his analysis," said Frank Barkocy, banking analyst at Josephthal & Co. "He also benefits from a broad cadre" of supportive colleagues because Keefe, Bruyette focuses on commercial banking.
Indeed, most investment houses cover various industries and have just a handful of banking analysts, located on different floors or behind shut doors.
But Mr. Duwan, Mr. Vandervliet, and the rest of the Keefe crew work from low cubicles within sight of each other and the firm's expansive trading desk.
The researchers share information and a camaraderie that comes from their common interests in accuracy - and in meeting tight deadlines.
Their days often extend well into the evening, Mr. Duwan notes, adding "It's a business where time management and attention to detail are crucial."
