Magazine article American Banker

First Chicago Upgraded as an Overlooked Value

Magazine article American Banker

First Chicago Upgraded as an Overlooked Value

Article excerpt

First Chicago Corp.'s stock was upgraded to "buy" from "hold" on Wednesday by S.G. Warburg & Co., which particularly lauded growth in the mid-western bank's credit card operations.

Nevertheless, shares of First Chicago fell $1.25, to $43, in afternoon trading as most banking stocks sold off amid a general market retreat.

Warburg's bank analyst, Francis X. Suozzo, said he downgraded the stock last month on worries about the impact of the prime lending rate cut to 5.5%, from 6%, by Morgan Guaranty Trust Co. of New York.

The prime reduction has not spread to other banks, but the Morgan move added to the general slippage in price suffered by bank stocks as third-quarter earnings were announced.

5% Loss on Rate Fears

First Chicago has fallen about 5% since Morgan's Oct. 18 announcement and is well under its 52-week high of $50.625 per share.

Mr. Suozzo said Wednesday that "the stock deserved to be upgraded at this price and the comfortable level of risk I see for it." His price target for First Chicago over the next year is $62, or 10 times his current 1995 earnings estimate for the bank of $6.20 per share.

The analyst said he "continues to like what First Chicago is doing in terms of its core business areas," all of which he expects to show strong revenue growth in the next year.

Other analysts have taken note as well.

Value Unappreciated

"There is considerable unrealized value in First Chicago's diversified banking franchise," said Thomas H. Hanley of CS First Boston Corp. …

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