Magazine article American Banker

Signet Wins Upgrade despite Suspect Loan

Magazine article American Banker

Signet Wins Upgrade despite Suspect Loan

Article excerpt

Signet Banking Corp.'s stock rose on news of upgrades by Goldman, Sachs & Co. and Dean Witter Reynolds Inc.

Analysts at the two firms shrugged off last week's disclosure of the bank company's $81 million exposure to an allegedly fraudulent loan and cited Signet's innovative consumer credit products and its sophisticated credit scoring models.

Analysts Robert Albertson and Lori Appelbaum of Goldman Sachs upgraded Signet from "moderate outperformer" to "recommended list buy." Anthony Davis, an analyst at Dean Witter, upgraded the bank from "accumulate" to "buy." The upgradings put Signet in the two firms' highest rating categories.

Signet shares closed at $25.50, up 75 cents.

The bank's stock price had plunged 5% last week after the big problem loan came to light. Some analysts raised the possibility of lawsuits against Signet by banks that had participated in the Signet-led loan.

But Mr. Davis of Dean Witter said he viewed the questionable loan as "only an isolated event," which will not affect Signet's performance. He projected a share price of $31 and $2.35 of earnings per share this year, $35 and $2.85 per share in 1997.

The company's loan-by-check program could produce "a tremendous improvement in profitability," said Mr. Davis. The loan-by-check is a stand-alone, preapproved loan that is mailed directly to prospective borrowers.

Goldman's Ms. Appelbaum also regarded the loan incident as an aberration. She said she was comfortable with the bank's credit underwriting procedures, adding that Signet has taken steps to prevent similar problems. …

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