Magazine article American Banker

BankAmerica at Top of Merrill's List

Magazine article American Banker

BankAmerica at Top of Merrill's List

Article excerpt

BankAmerica at Top of Merrill's List

BankAmerica Corp. will emerge from its combination with Security Pacific Corp. with the essential attributes of a successful industrial company, according to bank analyst Judah Kraushaar of Merrill Lynch & Co.

Citing expected cost advantages and market dominance - hallmarks of industrial might - Mr. Kraushaar added BankAmerica to his list of recommended stocks Wednesday.

BankAmerica's the One

"If we could own but one bank stock, our choice would now be BankAmerica," Mr. Kraushaar wrote in a research report that Merrill Lynch distributed this week. Moreover, BankAmerica will also have an "exceptional" opportunity to make further in-market acquisitions down the road, he said.

Since last month's merger announcement, BankAmerica's stock has hovered around $43 to $44 a share; it was trading at $42.875 late Thursday.

But Mr. Kraushaar predicted that the stock price will nearly double within several years. By 1994, he said, the bank should be capable of producing a sustainable return on equity of 18% to 19% and have a book value of as much as $49 a share.

A Glowing Assessment

With a sustainable return on equity at that level, BankAmerica would deserve to trade at a multiple of 160% to 170% of book value, which would translate into $78 to $83 a share.

Earnings, meanwhile, are projected to grow at a compound annual rate of more than 20% for the next several years, exceeding $8 per share by 1994, Mr. …

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