Banking analysts unveiled a number of changes in investment ratings and earnings estimates Thursday in the wake of the industry's second-quarter results.
The biggest beneficiary was CoreStates Financial Corp., which received "buy" ratings from two firms, Bear, Steams & Co. and S.G. Warburg & Co. The Philadelphia company's stock was up 87.5 cents to $58.25 in late trading. Citicorp was upgraded to "hold" from "may sell" by Brown Brothers Harriman & Co. Its shares lost 37.5 cents to $31.125.
Nationsbank Figures Lowered
Earnings estimates this year and next were raised significantly for both banking companies.
Estimates for NationsBank Corp. were lowered, however. by Robinson-Humphrey Co. Shares of the North Carolina superegional slipped 75 cents to $49.
Bear Steams analyst Carla A. D'Arista initiated coverage of CoreStates with a "strong buy" rating, saying she expected the stock to reach a target price of $79 within 12 months.
"Investors have been slow to recognize the bank's revitalized financial strengths," she said. "As perceptions catch up to the sustainability of CoreStates' growth prospects, look for significant stock price appreciation."
Ms. D'arista noted that the stock is trading at 186% of book value, well below its mid-April high of 204%.
"CoreStates' operating fundamentals were tarnished following the 1990 acquisition of First Pennsylvania Corp., which doubled nonperforming assets, and by the effects of the recession on the bank's primary markets," she said.
"After two years of aggressive chargeoffs and a difficult consolidation effort, CoreStates has regained its former stature among the most conservative but fastest-growing superregionals in the industry."
She compared the bank to Wachovia Corp., Winston-Salem, N.C., whose stock trades at 198% of book value, and SunTrust Banks Inc., Atlanta, now at 204% of book value.
Wachovia Shares Gain
Wachovia shares were up 62.5 cents to $34.25, while SunTrust stock was down 37.5 cents to $45.375.
Ms. D'arista also said that CoreStates is "an attractive takeover candidate for other banks seeking to establish a larger superregional presence."
At Warburg, Francis X. Suozzo said he was "impressed by the strong earnings prospects for the bank," which has the largest market share in Philadelphia and has been noted for its electronic banking innovations.
Raphael Soifer of Brown Brothers raised his rating on Citicorp because of significantly higher earnings estimates for the bank.
The analyst raised his estimate for fully taxed, fully diluted operating earnings this year by 20%, to $2.75 per share from $2.30. His 1994 estimate was raised by 27%, to $3.50 from $2.75.
The rating amounts to a "long-term hold" rating, said Mr. Soifer, who still thinks the bank will have to raise additional equity in the future. But the analyst now considers the stock "fairly valued rather than fully-valued."
Estimates for NationsBank were cut by Susan Leadem of Robinson-Humphrey because problem real estate loans and unexpected costs for data processing dampened second-quarter results.
The analyst reduced her 1993 estimate to $5.60 per share, from $5.80. Ms. Leadem said she had expected the cost of holding problem loans to drop by $10 million during the second quarter, but it remained steady.
