Short interest in Marshall & Ilsley Corp. jumped by 332,515 shares in the month ending May 15, the largest increase among banking companies traded over the counter.
The 141% rise, reported last week by the National Association of Securities Dealers, underscored uncertainty about the Milwaukee banking company's revenue that crept into the market following a weak first quarter.
Short interest is the outstanding volume of shares sold short - that is, borrowed and promptly sold. Short-sellers are betting that the stock price will fall, so their short positions can be covered profitably with cheaper shares.
Marshall & Ilsley stock, which was trading at $27.75 Friday afternoon, trades at a higher multiple of earnings than most bank stocks, thanks to the bank's profitable data processing focus. And analysts said the stock price has held up well, despite the round of reductions in 1996 earnings forecasts that caused the consensus on the company to drop to $2.04 per share from $2.10 at the end of the first quarter.
Bank short interest in general fell during the period among companies traded over the Nasdaq, and on the New York and American stock exchanges (See tables above and on page 34).
Gordon H. Gunnlaugsson, Marshall & Ilsley's chief financial officer, said he did not know why the short interest rose, but said it was unrelated to the company's eight-million-share buyback program. Other banks - including Banc One Corp., which has the biggest short position in the industry, at 16.9 million shares - have arranged short-selling of their shares as part of a strategy to accelerate buyback programs.
Analysts said there was no reason for pessimism about Marshall & Ilsley's prospects, and noted that the 568,297-share short position is small relative to the stock's trading volume.
The sudden increase in the bank's short position from a small base probably was an "anomaly," said Denis LaPlante, of Fox-Pitt Kelton.
As for the reduced earnings forecast on Marshall & Ilsley, "the problem has been with its core banking business," said Michael W. Plodwick, of Deutsche Morgan Grenfell/C.J. Lawrence.
After the company reported first-quarter earnings of 46 cents a share, Mr. Plodwick lowered his 1996 and 1997 earnings forecasts for the company to $2.00 and $2.25 a share, from $2.15 and $2.40.
But he continued to advise clients to accumulate the stock on the possibility that the company might spin off its valuable data processing unit.
*
On Friday, Merrill Lynch analyst Juday Kraushaar reiterated his long- term buy ratings on Chase Manhattan Corp. and Republic New York Corp., saying the banks were well positioned for a slow-growing economy.
Chase Manhattan shares finished the day tktk at tktk. Republic New York was tktk at tktk.
Separately, more than a million shares of Bowling Green, Ky.-based Transfinancial Inc. were traded, which is more than tktk times average daily volume.
Market sources said that at least one institutional investor was exiting the stock.
The shares rose/fell tktk to close at tktk.
