Magazine article American Banker

As Bank One Downgraded, Buyers Ignore the Sector

Magazine article American Banker

As Bank One Downgraded, Buyers Ignore the Sector

Article excerpt

Bank One Corp.'s stock was downgraded Tuesday by Goldman Sachs & Co. on a day when stock prices throughout the financial services sector fell.

Goldman Sachs dropped its "market outperform" rating on Bank One to "market perform," citing slower growth in receivables and rising losses at the Chicago company.

The bank's shares fell more than 5%, to $35.13, after closing Friday at $37, and were down as much as 6% during the day.

In a research report, Goldman Sachs equity analyst Lori Appelbaum wrote that Bank One has higher exposure to the credit card industry and subprime consumer lending business -- around 25% in its 2001 forecast. Other banks on Goldman's radar are less exposed in this area -- up to 5% of their business covers unsecured and subprime sectors, the report said.

"Moreover," Ms. Appelbaum wrote, "Bank One is less beneficially positioned for lower rates relative to other banks given that a 100-basis-point decline in interest rates has only a $29 million benefit to pretax earnings."

Goldman Sachs lowered its 2001 estimate on Bank One to $2.65 a share, from $2.75.

"While Bank One seems to be successfully integrating a growth strategy through its business lines, we view the optimism as largely priced into the stock at current levels," Ms. Appelbaum wrote.

Several other banks' shares tumbled Tuesday, including Bank of New York and Northern Trust. Bank of New York shares ended the day at $50.66, down 6.19%. Northern Trust dropped 3. …

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