Magazine article American Banker

PaineWebber Downgrades Bank One, Mellon, PNC

Magazine article American Banker

PaineWebber Downgrades Bank One, Mellon, PNC

Article excerpt

By TALLEY, KAREN

Urging investors to be more selective about bank stocks, PaineWebber Inc. on Monday downgraded Bank One Corp., Mellon Bank Corp., and PNC Bank Corp.

Bank shares as a group will outperform the market, but "more focus will be crucial" to select the stocks that will lead the pack, said Ruchi Madan, lead banking analyst at PaineWebber.

Federal Reserve rate cuts, relatively low price-to-earnings ratios, and continued strong earnings make a strong case for the bank group, Ms. Madan said.

But she reduced her rating on Bank One to "attractive" from "buy," saying there is little potential for further price gains after a recent run-up. The stock slid $2.125, to $51.8125, on Monday.

She cut her ratings on Mellon and PNC to "neutral" from "attractive," saying the stocks, while still positioned for gains, will not increase enough to outperform the market. Her "neutral" rating means she predicts less than a 15% price increase in coming weeks.

Mellon lost $1.375, to $61.5625, and PNC was off $1.9375, to $50.1875.

Ms. Madan said the new BankAmerica Corp. is her favorite stock. Its shares "have been excessively punished" because of the company's money- center-like activities and disappointing third-quarter earnings, she said.

The stock fell $2.3125, to $60.125.

Ms. Madan also reiterated her "buy" recommendation on Wells Fargo & Co., saying the company may delay some of the cost savings from its merger with Norwest but will temper this with higher earnings from its securities portfolio, a lower tax rate, and mortgage revenues. …

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