Chase Manhattan Corp.'s Wall Street following expanded on Tuesday as J.P. Morgan Securities inaugurated coverage of its stock with a "market performer" rating.
Morgan analyst Catherine L. Murray said Chase is "attractively valued" but tempered that assessment by saying its stock performance will probably be inhibited by the heavy costs of its growing investment banking business.
"As the company tries to enhance its wholesale banking, quite a bit of building will have to occur," Ms. Murray said.
Chase, she said, can be expected to focus on its mergers and acquisitions, advisory, and equity departments, which "will be expensive and time consuming, whether they build or buy."
By contrast, analysts at Credit Suisse First Boston Corp. on Friday reopened coverage of the bank with a "buy" rating, based on cost saves from a reorganization to be spearheaded by Chase executive Marc J. Shapiro and assurances that a brokerage firm purchase is not imminent.
But Ms. Murray said she thinks cost saves from restructuring moves by the highly regarded Mr. Shapiro may be funneled back into building the wholesale side of the bank. Chase shares closed Tuesday at $115.625, down 12.5 cents.
Ms. Murray's current top banking industry investment picks are Banc One Corp., BankAmerica Corp., BankBoston Corp., and the new U.S. Bancorp.
Also Tuesday, analyst Joseph Duwan of Keefe, Bruyette & Woods Inc. reduced his investment opinion on Pittsburgh's Mellon Bank Corp. to "attractive" from "buy." The move is valuation-based, Mr. Duwan emphasized, saying Mellon's stock price has advanced 56% since January.
"We're a big fan of Mellon," said Mr. Duwan. "It was one of our top stock picks for the year." He called the bank's business mix "superior" and said fundamentals are strong. Mellon's stock ended the day at $54.4375, down 87.5 cents.
Elsewhere, most bank stocks made moderate gains on Tuesday in the wake of their impressive run on Monday, when they far outdistanced other stocks.
The Standard & Poor's bank index gained 0.52%, to 596.74, while the S&P 500 rose 0.26%, to 933.62. The Dow Jones industrial average gained 0.21%, to 7851.91.
Morning market slippage, blamed on a falling dollar, was reversed when fresh economic reports showed worker productivity rose more than first was reported in the second quarter, while labor costs experienced their smallest gain in three years. That once again eased fears of inflation.
