Bank stocks rose Wednesday after two Wall Street firms issued reports dismissing investor concerns about interest rates.
Lawrence W. Cohn of Paine-Webber Inc., said in an interview that "the market reaction to possible higher interest rates is grossly overdone. At current prices, bank stocks offer compelling value."
Robert Albertson of Goldman, Sachs & Co. also asserted his optimism about bank stocks, citing the recent weakness in prices "and what we believe are irrational levels of interest rate fears."
|Buy' Ratings Reiterated
Mr. Cohn said the banks' closely watched net interest margins are "far less sensitive to interest rates" than is generally believed.
He repeated "buy" ratings on BankAmerica Corp., Bank of Boston Corp., Bank of New York Co., Shawmut National Corp., and Wells Fargo & Co. and said he "would aggressively buy most banks at current prices."
Mr. Albertson reiterated "buy" recommendations on Wells Fargo, BankAmerica, Banc One Corp., NationsBank Corp., and Citicorp.
He added that he still expects the bank stock group to outperform the rest of the market this year.
Wells, which fell $5 on Tuesday, was among Wednesday's top stocks. In late trading, the company's shares were up $2.125 to $98.75.
Besides getting renewed support from Mr. Cohn and Mr. Albertson, Wells benefited from a improved earnings forecast from Thomas Hanley of First Boston Corp.
Optimism on California
Mr. Hanley raised his earnings estimates for this year and next year, arguing that the California economy is poised for recovery.
He raised his 1993 estimate to $7.80 per share from $7.50 and his 1994 estimate to $11 from $9.50.
Among the other stocks cited by Mr. Cohn and Mr. Albertson, BankAmerica was up 87.5 cents to $42.125; NationsBank 50 cents to $46.125; Bank of Boston 37.5 cents to $22.375; Bank of New York $1 to $53.375; Shawmut 62.5 cents to $21; and Citicorp 12.5 cents to $26.75.
Most of these stocks had been up more sharply earlier in the day but lost ground later.
First Union Corp., which was not cited by either analyst, was a strong gainer. It rose $1.50 to $42.50. Keycorp rose $1.125 to $38.125.
|Panicking Too Soon'
"Some people are over-wrought about interest rates and are panicking too soon about lack of loan growth," Mr. Albertson said. "In fact, we think rates may go up, but we doubt it will affect margins one iota."
Among other reasons, he cited the fact that many banks have already assumed a 50-basis-point rise in some rates for operating purposes.
Early signs are also pointing to renewed loan growth.
"The mood about this has been too black," Mr. Albertson said, noting this would have been "the first economic recovery without loan growth."
But the doubters are also sticking with their arguments.
"If the stocks run far enough back toward their previous peaks they could very well hit a stone wall," said Stephen Berman of Natwest Securities. "A major rally will be an opportunity for portfolio trimming by overweighted investors."Big GainersSelected bank stock prices Stock price at Daily 4 p.m. gainWells Fargo $98.875 $2.25Fifth third 52.25 1.75First Union 42.50 1.50Keycorp 38.125 1.25Chemical 37.25 1.00BankAmerica 42.125 0.875Source: Reuters