Magazine article American Banker

SunTrust, Boatmen's Downrated; Prices Too High, Lehman Says

Magazine article American Banker

SunTrust, Boatmen's Downrated; Prices Too High, Lehman Says

Article excerpt

Lehman Brothers analyst Mark T. Lynch downgraded SunTrust Banks Inc. and Boatmen's Bancshares on Tuesday, saying both had exceeded his price targets.

SunTrust slipped 25 cents to $49.26 and Boatmen's fell $1 to $33.50, after Mr. Lynch downgraded them to "neutral" from "outperform.

Mr. Lynch noted both regional banks were up about 10% in May and both were trading at higher price-to-earnings ratios than their peers.

To exect Boatmen's to continue to outperform its peers was to "go against history," Mr. Lynch said. The St. Louis-based bank usually lags behind the group, he said.

The stock peaked at $35 in intraday trading May 20, up from a trading low of $31 at the begining of the month. It has been as low as $26.75 earlier in the year.

Mr. Lynch said Boatmen's has a strong trust business and benefits from doing business in a region where the competition is "not really strong."

Lately, the stock has benefited from speculation that Boatmen's will be acquired once interstate banking is approved.

Mr. Lynch argued, however, that a merger is not imminent, even if long-range prospects are good that Boatmen's will be acquired by the likes of Banc One Corp. or Nationsbank Corp.

As for SunTrust, Mr. Lynch said the bank is trading at about 10 times his 1995 earnings projection of $4.90 a share -- the highest price-to-earnings ratio in its group.

SunTrust also has been on a roll. It's shares peaked at $50.50 in intraday trading April 19, after having traded as low as $43.50 this year.

Mr. Lynch was not the first to express caution about SunTrust. …

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