BankAmerica Corp. Wins a Morgan Stanley Upgrade to 'Strong Buy'

By Dunaeif, Daniel | American Banker, October 6, 1995 | Go to article overview

BankAmerica Corp. Wins a Morgan Stanley Upgrade to 'Strong Buy'


Dunaeif, Daniel, American Banker


BankAmerica Corp. stock has been rising lately, spurring some debate among analysts over just how high the shares will fly.

The stock rose 75 cents Thursday to $63, after Morgan Stanley & Co. analyst Arthur P. Soter upgraded it to "strong buy" from "outperform."

Mr. Soter raised his 1995 earnings estimate to $6.45 from $6.25, and lowered his estimate for 1996 to $7.20 from $7.25.

He raised his 12-month target price to $76.

Other analysts didn't dispute the market's favorable view of BankAmerica of late, but they did have differences on how much upside is left in the company's stock.

Ronald I. Mandle of Sanford C. Bernstein & Co., maintains a "buy" rating on a bank, saying it is"shareholder oriented."

He cites management's announcement last week of an incremental repurchase of preferred stock.

Additionally, the bank is among a growing number of institutions that tie compensation for senior executives to stock performance, said Mr. Mandle.

These compensation programs "make management think more like owners," said Mr. Mandle.

Bank of BostonCorp. also has such performance incentives, which provide for special stock bonuses when the stock reaches a particular price.

BankAmerica has faster growth in revenue than in expenses, Mr. Mandle added. He predicts earnings to be a little above consensus expectations this year and moderately above expectations next year, excluding any benefit from the reduction in Federal Deposit Insurance Corp. premiums.

Some analysts expressed concerns that the bank will need to take higher loan loss provisions. The $100 million provision for the second quarter is "well below what we consider to be sustainable," said Raphael Soifer, a bank analyst at Brown Brothers Harriman & Co.

Mr. Soifer said that BankAmerica's $100 million provision for the second quarter of 1995 should have been closer to $311 million. …

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