The first two weeks of December brought mostly depressing news from the banking sector, including a string of profit warnings from such big companies as Bank of America Corp., Chase Manhattan Corp., J.P. Morgan & Co., and Unionbancal.
One company, however, proved that boring is sometimes better. Bank of New York Co. has concentrated on building up securities processing and other behind-the-scenes businesses, steering clear of investment banking, and last week it presented a shiny outlook for this quarter and beyond.
In a meeting Thursday at the companys Wall Street headquarters, chief executive officer Thomas Renyi impressed analysts by saying Bank of New York was comfortable with the consensus estimates. Three blocks down Wall Street and in Midtown, Morgan and Chase were warning on the quarter.
The consensus tracked by First Call/Thomson Financial has Bank of New York profits at 50 cents per share for the fourth quarter, $1.93 for the full year, and $2.17 for 2001.
Finally some good news out of a bank! Susan L. Roth, a senior bank analyst at Credit Suisse First Boston, wrote in a research report on Friday. Katrina Blecher, a managing director of research at Sandler ONeill & Partners, said she expected something upbeat, but this was better.
Analysts agreed that Bank of New York has done well to focus on its fee businesses, particularly its processing portfolio, which is expected to grow 19% next year. Analysts were confident that Bank of New York would build scale and profitability by taking over competitors processing businesses.
In credit quality, Ms. Roth wrote, Bank of New York is not immune to the challenge, but instead less vulnerable and far more capable of managing through. Ms. Blecher said that even if nonperforming assets rose the company would outperform its peers.
Thomas F. Theurkauf Jr. of Keefe, Bruyette & Woods Inc. said that in the event the economys slowing becomes more pronounced, credit quality would be Bank of New Yorks one fly in the ointment.
And Gerard S. Cassidy, an analyst at Tucker Anthony, said that if the companys asset quality comes under pressure, investor confidence might chill. He said that Bank of New York trades at a significant premium to the banking group.
The analysts raves notwithstanding, Bank of New York fell 62.5 cents, 1.16%, to close at $53.1875 on a generally bleak Friday for the markets. American Bankers index of the 50 largest banks fell 1.43% and its 225-bank index 1.78%.
The market overall continued its bearish stance on Friday, despite growing confidence among economists that an interest rate cut is near.
The Fed will cut rates rather earlier than later probably not this month but most likely on Jan. 31, said Sung Won Sohn, chief economist at Wells Fargo & Co. in San Francisco.
On Friday the Department of Labor reported a 0.2% increase in the November consumer price index. Core CPI (excluding food and energy) rose 0.3%, stronger than expected but not all that disconcerting, Mr. Sohn said.