Will Banking Industry Stocks Experience Further Declines?

By Currier, Chet | THE JOURNAL RECORD, April 24, 1990 | Go to article overview

Will Banking Industry Stocks Experience Further Declines?


Currier, Chet, THE JOURNAL RECORD


Today's tip for stock-market anglers: If you want to go ``bottom fishing'' right now, try the banks.

In a generally stagnant market over the past several months, few industry groups have sunk so low as the shares of banking institutions - especially those of the big international banks and many regionals operating in the eastern part of the country.

In the 12-month period ended in mid-April, Dow Jones's index of eastern regional banks dropped 33.86 percent, to rank dead last among 82 stock groups tracked by the financial publishing company.

``Money center'' banks in New York and other centers of international banking activity didn't fare much better, running No. 68 with an 11.4 percent decline.

There is a long and well-publicized list of reasons for the stocks' depressed state, of course. Industry profits have been riddled by bad loans to foreign countries, to high-risk companies and to real-estate ventures gone sour.

The question now up for debate among Wall Street analysts is whether the worst is still to come for the stocks - or whether the pessimists on the group might have gone overboard.

``Bank earnings are experiencing a recession even if the U.S. economy is not,'' says Arthur Soter, an analyst at Morgan Stanley & Co., in a current report on the industry. ``We expect disappointing earnings to persist a while longer before beginning to look up later this year.''

Some rude surprises were in store for anyone who started speculating a few months ago on the prospect of an eventual banking recovery.

Last week, for example, there was the news that Moody's Investors Services was reviewing its ratings of some of the debt of Citicorp, one of the nation's biggest bank holding companies.

In another development earlier in April, statements from federal regulators raised the specter of a long and stringent crackdown on bank lending practices. …

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