PNC, Rated a Bargain, Gains as Most Banks and the Dow Retreat
Kleege, Stephen, American Banker
Shares in PNC Bank Corp. rose in a declining market on Wednesday, following an analyst's report that singled out the Pittsburgh company's stock as a bargain.
"We believe it makes sense to commit new money to those companies with strong underlying fundamentals whose shares have underperformed on a relative basis or still trade significantly below their 52-week highs," wrote Michael A. Plodwick, of C.J. Lawrence/Deutschebank Securities Corp.
In a comment released late Tuesday, Mr. Plodwick said PNC fills the bill on both counts. The stock is trading at a discount to other regional bank stock in terms of price-to-book value and price-to-projected earnings. And its price is well shy of a 52-week high, reached last April, of $36.375.
Most Bank Shares Off
Shares in PNC were up 87.5 cents, to $29.375, and the Dow Jones industrial average was off 22.22 points, to 3661.47 at the close of trading on Wednesday.
Bank shares in general were off, despite signs in the first few quarterly eanings reports that interest margins are stabilizing and loan demand is on the rise.
Bank analysts said investors may have been spooked by a trading loss reported by First Chicago Corp. and a dispute between Bankers Trust New York Corp. and Proctor & Gamble over derivatives contracts. (See stories on page 4 and page 1.)
First Chicago fell 87.5 cents, to $52.75, and Bankers Trust was off $1.845, to $69.625.
Mr. Plodwick said the average price-to-earnings multiple among regional banks he follows d is 10.4 times earnings. PNC's stock is trading at only 8.8 times Mr. Plodwick's projected 1994 earnings of $3.20 per share. And the company has indicated that estimate may be low.
Price-to-Book Lags Sector
The stock is also undervalued on a price-to-book basis, selling at 154% of book value when other regionals command 175%.
Mr. Plodwick said PNC hadn't performed as well as anticipated in 1993. …