UBS Securities Inc. has opened coverage on four major Ohio banks, citing their conservative culture, strong management and above-average loan growth.
UBS analyst Michael L. Mayo established "buy" ratings on Huntington Bancshares and Banc One Corp., and "hold" ratings on Society Corp. and National City Corp.
He ranked Columbus-based Huntington as the top Ohio selection, "based on valuation, attractive profit niches, and effective use of technology."
In late trading on Monday, Huntington shares were up 62.5 cents to $27 amid a general advance in stocks as interest rates continued falling. Banc One was up $1.25 to $56.625, National City was ahead 62.5 cents to $50.375, and Society up $1.125 to $34.875.
Among Best Performers
Huntington's shares rank among the best performers this year, ahead 15.9% despite the recent slump in bank issues. But Mr. Mayo expects it to advance further, into the mid $30-range, over the next 12 months.
The analyst said he was impressed that Huntington's management "has followed an independent course" by stressing auto-related lending and computer and personnel-driven customer service, and by acquiring a Boston mortgage company when others were retreating from the market.
He noted that 30% of Huntington's loans are auto-related and are mostly purchased dealer notes with high payment rates. Meanwhile the mortgage unit's earnings are expanding rapidly, up 50% so far in 1993.
Loans may expand 10% annually both this year and next at Huntington, he said, far higher than expected for the rest of the industry, while noninterest income may rise 20% over the same period.
Termed |Underowned'
The analyst described Huntington as "underowned," with only 20% of shares held by institutional investors.
Huntington has gotten strong reviews from others as well. Frank Barkocy and Joseph Roberta of Advest Inc. recently cited "outstanding profitability prospects" and termed the stock "undervalued" with a "buy" rating.
Fred A. Cummings of McDonald & Company Securities Inc. last month raised his rating on the stock to "aggressive buy." In January, Salomon Brothers Inc. initiated coverage, calling the company "a pearl."
Banc One Rated a |Buy'
The UBS analyst also placed a "buy" rating on the more widely followed Banc One, saying it was "relatively immune to industry problems challenging other banks" and that its 25% price-to-earnings premium over other regional banks was justified.
Mr. Mayo cited "explosive loan growth" of 10% to 19% annually as a result of bank acquisitions in growth, areas like Texas and Arizona. Banc One is also headquartered in Columbus.
The analyst compared National City, based in Cleveland, to a utility issue and described it as defensive stock that "should appreciate but not to levels compelling for current investment."
Society, also headquartered in Cleveland, was termed "a quality bank with
strong capital, good asset quality, and top-notch earnings." But its stock is "fairly valued" right now.
