In a striking change of heart, a veteran analyst has named PNC Bank Corp. as a strong investment favorite in place of Banc One Corp.
"It's time for a change in emphasis," said Nancy A. Bush, associate research director at Brown Brothers, Harriman & Co., New York, in shifting the spotlight Thursday to PNC.
The action came as bank stocks once again lagged while broader markets headed upward. The Dow Jones industrial average made a record for the third straight day, buoyed by Federal Reserve Chairman Alan Greenspan's forecast of muted domestic effects from overseas volatility.
Ms. Bush upgraded PNC to long-term "outperform" from "market perform" and deemphasized Banc One to long-term "perform" from "outperform."
Banc One, which fell 87.5 cents, to $53.8125, had been a longtime favorite of Ms. Bush, while PNC, which dipped 31.25 cents, to $54.625, had occasionally come in for criticism.
PNC's "growing stream of fee-income businesses" played a major role in spurring the upgrading, Ms. Bush said. "The company has set a target" for half its revenues to come from fees by 2000.
"Two recent moves should enable them to reach this goal," she said. They are: the acquisition of Midland Loan Services, a large servicer of commercial mortgage loans, and the decision to give managers of PNC's BlackRock Asset Management unit responsibility for all asset management businesses.
PNC, said Ms. Bush, is effectively becoming a "risk diversifier" whose shares let investors play on several themes, like credit card gains and asset management, instead of "betting the ranch on any one aspect of growth."
Concerns about credit card operations and cost savings from a massive centralization effort prompted the downgrading of Banc One. Its recent purchase of card company First USA could make the Columbus, Ohio, banking company particularly vulnerable to customers who are "increasingly debt fatigued," Ms. Bush said.
At the same time, she questioned whether cost savings would be noticeable this year from a bankwide streamlining program called Project One. Banc One is also looking for acquisitions, and that involves the risk of dilution, Ms. Bush said.
In the stock market overall, the Standard & Poor's bank index fell 0.17%, and the Dow gained 0.66%. The Nasdaq bank index edged up 0.05%, and the S&P 500 increased 0.40%.
Amsouth Bancorp, based in Birmingham, Ala., fell 55.6875 cents a share, to $31.25, despite an upgrading to "outperform" from "neutral" by analyst David B. Hilder at Morgan Stanley Dean Witter Discover Co.
"I'm gaining confidence they will achieve financial targets" that include 18% annual growth in earnings per share over the next couple of years and an improved efficiency ratio, to 50 or better by the end of 1999, Mr. Hilder said.
Amsouth's market area-the solidly growing states of Alabama, Florida, Georgia, and Tennessee-and lending initiatives will help it achieve its goals, Mr. Hilder said. At the same time, he said, "management is well aware of the risks" of pushing for loan growth and as a result is prepared to handle the effort.
In other action, Chase Manhattan Corp. was unchanged at $119.6875 after Ronald Mandle of Sanford C. Bernstein & Co. reiterated an "outperform" ranking.
And Sterling Financial Corp. dipped 50 cents, to $22, after Erika Hill of Pacific Crest Securities reiterated a "buy" recommendation and set a 12- month price target of $26.