Magazine article American Banker

Downgrades for Banc One, Five Other Big Banks

Magazine article American Banker

Downgrades for Banc One, Five Other Big Banks

Article excerpt

Salomon Brothers bank analyst Carole Berger Tuesday downgraded six regional and superregional banks to "hold" from "buy," citing cyclical economic factors that could limit their earnings growth for the next two years.

"It'll be a more difficult operating environment in 1996 for all banks said Ms. Berger, who pared her list of recommended bank stocks to 11 from 17, downgrading Banc One Corp., First Chicago Corp., National City Corp., Marshall & Ilsley Corp., Keycorp, and First Union Corp.

She pointed to decelerating loan growth, significant pressure on net interest margins, and an inevitable deterioration of credit quality from today's high levels.

Consequently, Ms. Berger reduced 1996 earning estimates for Banc One to $3.25 a share, from $3.50; Keycorp, to $3.85 from $4.05; Marshall & Ilsley, to $2.35 from $2.45; National City, to $3.15 from $3.30; and First Union, to $6 from $6.10.

She left her 1996 earnings estimate for First Chicago unchanged at $7.50 a share. First Chicago has "done pretty well relative to die group since September," she said, "and its relative value now is not as attractive."

Ms. Berger said she has rarely cut this many banks off her recommended list in one fell swoop, but she emphasized that she remains positive on many banks.

"There are plenty of good banks that are fairly valued in the marketplace." she said.

Ms. Berger maintains "buy" ratings on Bank of New York Co., BankAmerica Corp., Citicorp, CoreStates Financial Corp., First Bank System Inc., First Interstate Bancorp, First Fidelity Bancorp., Fleet Financial Group Inc., Mercantile Bankshares, Midlantic Corp., and Wilmington Trust Co.

Other analysts agreed with Ms. Berger's assessment of the current credit environment.

"We're getting to the point in the cycle where the next focus in the market becomes credit quality, which usually happens during talk of an economic slowdown or recession," said Thomas Maier, an analyst at Kemper Securities. …

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