Big-Bank Stocks Give Up Some of Friday's Advance

Bank stocks edged lower Monday, retreating slightly from their sharp rally on Friday when a favorable employment report sparked widespread buying.

The American Banker index of the top 50 banks dipped 0.03%, and its index of 225 banks rose 0.24%. The weak tone overshadowed positive comments on several financial stocks. Shares of Synovus Financial Corp. of Columbus, Ga.; Wachovia Corp. of Winston-Salem, N.C., Baltimore's Mercantile Bankshares Corp., and National Commerce Bancorp. of Memphis all declined despite getting upgraded recommendations early Monday from the investment firm Robinson-Humphrey.

Wachovia, which was upgraded to "outperform," from "neutral," ended at $58.6875, down $1.1875. Synovus fell 31.25 cents, to close at $19.4375; National Commerce 12.5 cents, to $18.6875; and Mercantile 6.25 cents, to $35. All three were raised to "buy" ratings from "outperform."

Thrift shares were generally steady, though Astoria Financial Corp. eased 43.75 cents, to $32. Salomon Smith Barney analyst Thomas O'Donnell trimmed his earnings estimate for the company, citing a conversation with Astoria's chief financial officer.

Mr. O'Donnell said that Astoria is significantly downsizing its balance sheet because of the difficult interest rate environment, a move that would probably reduce its earnings. But despite trimming his estimate for 2001 to $4.50 a share, from $4.75, Mr. O'Donnell affirmed his "buy" rating on Astoria.

"We view this strategy favorably and have long advocated it for Astoria and other companies in our universe," he wrote in a research note. "It is our view that a strategy of adding lower-yielding assets to the balance sheet, in order to grow earnings in this environment, is one for which investors have not and will not pay up."

Mr. O'Donnell said Astoria continues to show "good asset quality and they do a good job in keeping costs down. Their loans, based on single-family loans, are among the safest on the market." His target price on Astoria is $40 per share.

In the broader market, stocks were generally stronger, extending their gains in the wake of Friday's employment numbers. The Dow Jones industrial average was up 0.92%, at 10,867.01, and the Standard & Poor's index of 500 stocks climbed 1.12%.

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