BankAmerica Corp. shares endured another blow Wednesday, losing their "buy" rating from Smith Barney Shearson Inc.
It was the second downgrade this week for the San Francisco superregional bank.
Alison A. Deans, a Smith Barney analyst, said she acted because earnings growth at Bank America will likely be sluggish for at least six months because of the weak California economy.
BankAmerica shares had slipped 62.5 cents to $44.25 in late afternoon trading. They have fallen 4.7% in value since Sept 20. By contrast the American Banker index gained 2.4%.
Earnings Estimate Cut
Ms. Deans reduced her rating to "outperform" from "buy" and sliced her 1994 earnings estimate to $5 per share from $5.75. But she noted that the stock is still attractive for longer-term investors.
On Monday, the bank's stock lost a longtime booster when Thomas K. Brown of Donaldson. Lufkin & Jenrette Securities Corp. cut his rating to "neutral" from "buy" and reduced earnings estimates, Donaldson, Lufkin & Jenrette removed the stock from its recommended list.
Last Friday, Merrill Lynch & Co. also cut earnings estimates for the bank, citing continuing weakness in business conditions on the West Coast.
State Economy at Issue
Ms. Deans said she thinks BankAmerica' shares possess significant upside potential once the California economy begins to register solid improvement.
However, the state's current recession has already been deeper and more protracted than many observers predicted.
Estimates of when it may turn upward, and how strongly, appear tenuous. Some now say the economic picture will not begin to improve for another year.
Brent B. Erensel of UBS Securities, who has a "sell" rating on the stock, said BankAmerica is "once again likely to be unique in reporting a decline in operating results" because of weak local conditions when banks' third-quarter earnings are announced next month.
The good news, however, is that its management "may recommend a stock buyback or preferred dividend redemption to utilize the company's rapidly growing internally generated capital." he said.
But BankAmerica continues to have its boosters, James M. Rosenberg of Lehman Brothers, for instance, rates the stock a "buy" with possible price appreciation of 35% to 45% within 18 months.
Mr. Rosenberg has a $64 price target on BankAmerica's stock.
