Magazine article American Banker

Economic Anxieties Casting Shadow over Quality Banks

Magazine article American Banker

Economic Anxieties Casting Shadow over Quality Banks

Article excerpt

Shares of bellwether institutions like Fifth Third Bancorp could be ensnared by worries about an economic slowdown.

Well-regarded Fifth Third enjoys one of the highest price-to-earnings ratios among bank stocks. But that paradoxically also heightens risk, which prompted a downgrade to "maintain" from "accumulate" Wednesday by Timothy Willi of A.G. Edwards & Sons.

Mr. Willi also downgraded to "maintain" from "buy" Commerce Bancshares.

So far, the shares continue doing well. Fifth Third, based in Cincinnati, ended the day at $81, up $1.125. Commerce Bancshares was also up, 25 cents, to $68.50.

But the stocks of many quality banks are at the high end of their historical range at a time when the economy may be slowing, Mr. Willi said. "Right now everyone is delivering," but uncertainty is increasing.

Among his banking concerns, Mr. Willi said commercial net chargeoffs are moving upward. "They are not at levels that scare us," but more reserves may be needed, he said.

Meanwhile, ripples from the Asian financial crisis continue to be felt, with Unionbancal Corp.'s shares the latest to enter the spotlight.

Unionbancal, parent of Union Bank of California, fell $1.4375, to $100.0625 after a downgrade to "market perform" from "attractive" by Keefe, Bruyette & Woods. This year's price run-up has "put a lid on the shares' upside potential" for the time being, said analyst Thomas F. Theurkauf.

But shares of the San Francisco institution could fetch $130 to $140 if their primary owner, Bank of Tokyo-Mitsubishi Ltd. …

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