Magazine article American Banker

First Chicago Rises as Salem Says 'Hold.' (Analyst George M. Salem)

Magazine article American Banker

First Chicago Rises as Salem Says 'Hold.' (Analyst George M. Salem)

Article excerpt

Shares of First Chicago Corp. rose Wednesday after analyst George M. Salem of Prudential Securities Inc. upgraded the stock to a "hold" from a "sell."

Asserting that First Chicago "has taken charge of its destiny," Mr. Salem said the bank's strategic plan emphasizes areas where it is strongest - retail and middle-market banking.

"If carried out effectively, it will give the bank a cleaner balance sheet and brighter outlook," Mr. Salem said.

First Chicago gained 37.5 cents, reaching $35, in afternoon trading. The stock is up 40% this year but still sells just under its March 31 book value of $35.07 a share. On average, the nation's largest banks are selling at about 1.4 times book.

Convincing Road Show

The stock has outperformed many other bank issues this month, apparently because of well-received presentations by management in connection with a recent equity offering.

The upgrade leaves Mr. Salem, Wall Street's most bearish bank watcher over the past few years, with only three sell recommendations: Citicorp, Bank-America Corp., and Wells Fargo & Co.

For Mr. Salem, a hold is a good rating. He has hold recommendations on, among others, a trio of highly regarded banks: J.P. Morgan & Co., NBD Bancorp., and Sun Trust Banks Inc.

The analyst is impressed with the sharper focus brought to First Chicago by Richard L. Thomas, who took over the reins from Barry F. Sullivan on Jan 1.

"The two most important things they are doing are de-emphasizing big corporate lending and selling as much as $3 billion of nonperforming, nonstrategic, or otherwise undesirable assets," he said. …

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