BankAmerica Breeds Doubt Amid Worries on California

BankAmerica Corp. is getting mixed reviews from banking analysts who applaud its expansion program and upcoming merger with Security Pacific Corp. but worry about the painful recession in California.

Focusing on a grim economic outlook, George M. Salem of Prudential Securities Inc. made a "sell" recommendation on the stock this week. He noted that San Francisco-based BankAmerica is "sitting on top of a regional economic fault line" along with other California banks like Los Angeles-based Security Pacific.

"I know some people will say, |There he goes again,'" said Mr. Salem, who is viewed as Wall Street's most bearish bank analyst. "My case is not against BankAmerica, which I like. It's that I think California is going to be behind the economic curve for several years."

Optomism in Some Quarters

Other analysts sounded more optomistic.

Thomas H. Hanley, banking analysts at Salomon Brothers Inc., last week "strongly reaffirmed" his "buy" recommendation on BankAmerica shares. It is the only West Coast banking company whose earnings and asset quality exceeded thirdquarter expectations, he noted.

But Mr. Hanley also said California's economic health is "still a concern." At best, its performance will match that of the nation as the recession eases, but "a lag appears more likely" in the state, he said.

BankAmerica's shares are off 7.25% in value since Nov. 1 and are at their lowest level since before the merger with Security Pacific was announced Aug. 12. Wednesday, the San Francisco giant's shares traded at $38.50, off 37.5 cents, on the New York Stock Exchange.

Varied Profit Estimates

Pointing up the differences of outlook, Mr. Salem cut his 1992 earnings estimate for BankAmerica to $4.50 a share, from $5. But recently, John J. Mason, banking analysts at Interstate Johnson Lane in Atlanta, reiterated his 1992 estimate of $5.40 a share, and Mr. Hanley sticks with his $5 outlook.

BankAmerica has three acquisitions pending that will, according to Mr. Hanley, virtually complete its transition from a two-state institution - in California and Washington - "to a western superregional," with 2,400 offices in 10 states.

Price-Cut Suggestion

Besides Security Pacific, BankAmerica is acquiring Valley Capital Corp., Las Vegas, and H.F. Holdings, Honolulu, parent of HonFed Savings Bank. But it is the Security Pacific deal that has gained most attention.

Mr. Hanley said he still considers the Security Pacific deal "a brilliant merger," and he rejected as "baseless" recent suggestions from the investment community that the price be reduced. BankAmerica is paying 0.88 share of its stock for each Security Pacific share, or about $4.3 billion.

Analyst James M. Rosenberg of Shearson Lehman Brothers Inc. said he thinks BankAmerica "is finding credit problems in Security Pacific's portfolio to be worse than expected but the merger contract prevents a renegotiation of the price."

On the other hand, he said, Security Pacific has cut its dividend and will retain $100 million in equity over the next two quarters, effectively cutting the purchase price for BankAmerica.

Los Angeles' Weakness

Mr. Salem, who has long had a "sell" recommendation on Security Pacific, is less than keen on the merger, believing that the company's home area of Southern California is the weakest part of the state economically.

Business and consumer activity in Los Angeles and its surrounding counties comprises 60% of the state's economy, he noted.

On an unrelated matter, BankAmerica said Wednesday that it has filed a shelf registration with the Securities and Exchange Commission for up to $3 billion of debt securities and warrants, the proceeds to be used for general corporate purposes.

PHOTO : Fall Downer Price per common share or BankAmerica

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