Magazine article American Banker

AmSouth, U.S. Bancorp, M&I on Salomon List

Magazine article American Banker

AmSouth, U.S. Bancorp, M&I on Salomon List

Article excerpt

Worried by the sharp rise in bank stock prices this year, Salomon Brothers Inc. analysts have urged clients to focus on three regional banks that still have room to rise.

The banks are Marshall & Ilsley Corp., Milwaukee, AmSouth Bancorp., Birmingham, Ala., and U.S. Bancorp, Portland, Ore.

In their most recent strategy report, the analysts said they were "increasingly apprehensive" about a price correction in bank stocks.

"Put simply," they said, "bank stock investments have become too fashionable for our taste."

Ahead of the Market

Their concerns put them in growing group of Wall Street bank watchers who have become wary of the stocks as they have outraced the rest of the stock market.

The American Banker bank stock index is up 10% this year - which one analyst this week termed "a year's worth of gains." Meanwhile, the Dow Jones industrial average has advanced 4.4%, while the Standard & Poor's 500 stock index has gained only 2.8%.

By comparison, Marshall & Ilsley shares have gained 7.5%, AmSouth's are up just 0.75%, and U.S. Bancorp's have fallen 2.8%.

U.S. Bancorp. has been hurt by fears about the impact of anemic aircraft sales by the Boeing Co. on the Northwest's economy.

Low Price-to-Earnings

The banks have also lagged on a price-to-earnings basis. Last week, Marshall & Ilsley traded at 11.8 times its expected 1993 earnings, versus a 12.5 multiple for regional banks overall, according to Salomon. AmSouth was priced at 10.8 times earnings, and U.S. Bancorp. was well off the pace at 10. …

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