Dennis Shea, a Morgan Stanley & Co. analyst, boosted his 1994 earning estimate on Bank of New York Co. Friday. The shares gained $1.875, to $54.875.

Mr. Shea's revised estimate for the company's stock is %6.85 per share, up 25 cents per share from his previous estimate.

That's well above Wall Street's consensus estimate of $6.22. Mr. Shea said that his revised numbers may even prove conservative. He doesn't rule out the possibility that Bank of New York will earn $7 a share next year.

Sees Credit Costs Plunging

Mr. Shea, who has been a leading supporter of the stock since 1991, said he raised his estimates because he expects credit costs to fall dramatically and because the bank's net interest margin may actually expand in 1994.

"I believe the recovery in credit quality will be more dramatic than people suspect," he said.

He predicts the provision will fall to $200 million next year, from an estimated $304 million for 1993. And he expects chargeoffs to drop sharply in 1994, to $225 million from an estimated $374 million.

Credit Card Gains

Bank of New York is growing its credit card loans at 20% a year, or $1 billion. BUt it is not expanding its total loan portfolio. Instead, it is reducing its international loans and placements and replacing them with credit card loans.

Mr. Shea said that the creditcard loans have a margin of between 7.5% and 8.5%. The loans running off have a 1% margin.

He calculates that for every $1 billion of credit card loans that replace international loans and placements, the net interest margin widens by 17 basis points.

|A Good Shot'

"I think this bank has a good shot at holding the margin steady or increasing it next year," he said.

The shares have stalled around $52 for weeks, primarily because of investors' fears that the bank will make a big, uneconomical acquisition in New Jersey. The bank recently agreed to purchase National Community Banks in that state for an estimated 2.6 times book value.

"Did Bank of New York pay up for that deal -- sure," said Mr. Shea. However, he added, Bank of New York is one of the best acquirers in the business, having bought Irving Trust Co. and made it work. Now that the bank has a toehold in New Jersey, expanding its presence there will be more economical.

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