The best time to buy bank stocks is right now, according to Katrina Blecher of Gruntal & Co.

She gives three reasons for her bullishness, which puts her at odds with some other Wall Street analysts.

With the Federal Reserve at or near the end of its efforts to brake the economy and deter inflation, a period of flat or falling interest rates lies ahead. She sees that as "the perfect market for bank stocks."

Meanwhile, 1995 is shaping up as "the year of the bank merger," with two major deals already announced. That should draw increased investor attention to the bank sector.

Last but hardly least, she notes, the industry's fundamentals remain strong, its dividends are secure and rising and stock repurchase programs are expected to continue.

To back up her optimism, Ms. Blecher on Tuesday introduced new coverage of a diverse group of 10 banking companies, giving six of them "outperform" ratings.

Her favorite right now is CoreStates Financial Corp., Philadelphia, followed closely by Bank of New York Co.

The others are Hibernia Corp., New Orleans; Independent Bank Corp., Rockland, Mass.; Mercantile Bankshares, Baltimore; and UJB Financial Corp., Princeton, N.J.

Ms. Blecher, a banking industry analyst for the past 15 years, thinks investment in bank stock should not be completely dictated by phases of the business and interest rate cycle.

"Banks do not operate themselves directly in line with the business cycle," she said "Their loan portfolios grow when they loosen their (loan) covenants, which they are doing right now. They have nearly total control over how much business they put on their books."

Right now, banks' credit quality is so strong that they are unlikely to experience bad loan problems for three years, she said.

"The banking business is very cyclical. Banks tend to make the same credit mistakes over and over again, but as an investor you have to take that as a given," she said.

"They are going out and aggressively building up their loan portfolios right now, not because the loan demand is out there, but because they are loosening terms and increasing (credit) lines.

"It takes a long time for nonaccruals to become chargeoffs and the banks just want to keep relationships going," she noted. "It has to be done to protect their customer base."

And the credit cycle is also too long to worry about from an investment standpoint, Ms. Blecher said. "You have to know when to play it, with the whole idea being to get in and out at the right times."

"Right now we are not anywhere near the bad stage of the credit cycle," she said. "So now is a good time to be in the bank stocks. They are cheap and loans that could eventually hurt the bottom line may not even have been booked yet.'

In evaluating banks for investors, Ms. Blecher pays close attion to efficiency ratios.

CoreStates is her current favorite because of its improving efficiency, a trend that should be helped along by the company's newly announced restructuring program.

The Philadelphia bank's efficiency ratio in the fourth quarter was "an admirable 59.7%, down from 63.2% in the fourth quarter of 1993," Ms. Blecher noted.

Details of the CoreStates program, called BEST, for "Building Exceptional Service Together," are not due for about six weeks.

Initially, the analyst expects a large restructuring charge, but she expects the market to overlook that. "When Fleet Financial Group announced the details of 'Fleet Focus,' a very similar program, that stock appreciated 27% in under four months," she noted.

CoreStates also has a consistently strong net interest margin, averaging 5.8% last year, she said.

"It was one of only a couple of large regional banks able to maintain a margin over 5% for the past seven years, she said. "Actually, its lowest margin in that period exceeded the highest margin of any of its local competitors."

The superb margin is attributable, she said, to high-yielding businesses such as asset-based lending and credit cards that CoreStates funds with a large base of low-cost deposits.

"These benefit from the cash management business rather than interest rate bets taken by the company," she said.

Independent Bank Corp., in Massachusetts, she said, is "a good takeover candidate that also looks good on its own merits and has an attractive valuation as well."

The company is already drawing customers disenchanted by the pending acquisition of Shawmut National Corp. by Fleet Financial, she noted.

Loan growth for Independent is currently running at a 25% annual pace, with credit standards still high, she said. The bank also is enjoying good deposit growth and has strong trust operations and a solid efficiency ratio.

Mercantile has the largest trust business in Maryland, she noted, and anticipates growth of 8% this year in that area. Loans will likely grow 7% and overall revenues by a more-than-respectable 12%.

UJB Financial operates an impressive franchise in New Jersey and eastern Pennsylvania. It is usually mentioned at the top of any list of takeover candidates.

Ms. Blecher also likes UJB because she is expecting a "major decline in the loan-loss provision" this year. Loan growth should be in the 9% to 10% area.

For Hibernia in New Orleans, "the main advantage is great growth in pretax income this year." But that not be immediately apparent at the bottom line since the company will likely use up its tax credits this year.

But this bank is growing "faster than average," she noted. Loan growth will be in the 8% to 12% realm this year. Meanwhile, the fruits of restructuring efforts should appear in the form of lower overhead expenses.

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