Magazine article American Banker

Mellon's Stock Price Continues to Slide on Profit Taking, Concerns over Merger

Magazine article American Banker

Mellon's Stock Price Continues to Slide on Profit Taking, Concerns over Merger

Article excerpt

Shares in Mellon Bank Corp. continued to slip amid tepid trading on Tuesday, as markets prepared to close for a day in observance of the death of former president Richard M. Nixon.

Mellon stock was off by as much as $1.125, before bouncing back to close at $56.125, off 62.5 cents.

Analysts attributed the decline to profit taking following a price run-up that peaked at $59.875 in intraday trading on April 18, the day before earnings were announced. In addition, investors may have been concerned about the impact of the pending acquisition of Dreyfus Corp. - a matter of sharp debate among bank stock analysts.

Brent B. Erensel of UBS Securities said the investor skittishness over a recent decline in the the value of Dreyfus equity funds and an increase in the Dreyfus' expenses "might be misplaced." He argued that the merger presents opportunities for improved efficiencies that makes Mellon stock "a great way" for investors to buy into a fiduciary company at a low price.

James M. Schutz of Chicago Corp. said the acquisition would put Mellon in the same category as Northern Trust Corp. and State Street Boston Corp. Those banks trade at 12.8 and 14.4 times earnings, respectively.

Mr. Schutz said Mellon is trading at 9.3 times his 1994 earnings estimate of $6, making his $67 price target seem conservative.

On the other side in the debate is Christoph M. Kotowski, of Oppenheimer & Co., who gives Mellon a neutral "market performer" rating. He said he doubts the bank contemplates the kind of shift in its mix of businesses that would be needed to become the kind of high-multiple asset management company the other analysts predict. …

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