Financials stocks rallied Thursday despite another profit warning from the group, this one from Hibernia Corp.
The New Orleans-based company announced that fourth-quarter profits would fall to 10 cents per share, sharply below expectations of 34 cents. Profits in the third quarter were 30 cents. Hibernia also said it was adding $70 million to its loan loss provision. (See related story, page 1.) The warning came just three days after the departure of chief executive officer Stephen Hansel. Hibernia had indicated that his resignation was not based on credit issues, but analysts said that the announcement suggested otherwise. At the very least, some said, J. Herbert Boydstun, the new CEO, appeared to be undertaking the time-honored practice of clearing the slate upon assuming office.
Michael L. Granger, an analyst at J.P. Morgan Securities, characterized the news in his research note as a "house-cleaning move which is not unusual for a new CEO to undertake" but wrote that he is still cautious on the stock. He rated Hibernia as a "market performer" and said that "we still think there may be risk to 2001 estimates."
Gary B. Townsend, of Friedman, Billings, Ramsey, agreed that Mr. Boydstun might want to get the syndicated loan problems behind him. "If that is being done we applaud the move," especially in light of an expected economic downturn, "but the step comes as a surprise," Mr. Townsend said.
Lehman Brothers also downgraded Hibernia shares to "neutral" from "outperform."
In the end, Hibernia's stock rose to $12.1875, up 43.75 cents, or 3.72%.
Meanwhile, financials rebounded from their recent bout of weakness, with even the beaten-down investment banks moving upward.
The American Banker index of top 50 banks was up 2.77% and the index of 225 banks 3.78%. Even the Nasdaq picked up 0.31%, while the Standard & Poor's 500 index rose 0.8%.
Elsewhere in the market, analyst William H. Ryan, of Salomon Smith Barney, initiated coverage of WFS Financial with an "outperform" rating. He wrote in a research note that the consumer auto lender has been improving its balance sheet as well as earnings-per-share growth. He expects the company to grow its earnings by 20% next year, somewhat slower than in 2000 because of the cooled economy.
WFS fell 12.5 cents, or 0.67%, to $18.5.
Shares of Firstar Corp. gained 81 cents, to $24, and its intended merger partner, U.S. Bancorp, climbed 81.25 cents, or 3.5%, to $24, after Dain Rauscher Wessels analyst Jon Arfstrom upgraded both companies to a "strong buy."
"Among the larger regional banks, asset quality is a major concern," Mr. Arfstrom said in a report. "Both Firstar and U.S. Bancorp appear to have nonperformers and net chargeoffs under control. As such, the combination remains one of the asset quality bright spots among its peers."
He also cited the combined operation as possessing strong earnings growth potential, particularly among the regional banks.
The board of directors of State Street Corp. authorized a two-for-one stock split in the form of a 100% stock dividend Thursday, pending shareholder approvals. State Street shares gained $2.78, or 2.33%, to $122.20.