Major banks recovered ground on Monday in a broad market rally, but some smaller banks lagged behind the pack.
Shares of Chase Manhattan Corp. rose $1.1875, to $112.25, Citicorp was up $5.3125, to $132.125, and J.P. Morgan & Co. gained $2.6875, to $119.75, on the strength of positive moves in overseas markets. Large banks were hit hard last week by earnings worries as the overall market endured a five-day decline.
Those fears apparently found their way to smaller banks on Monday. "People are becoming concerned about the effects of a general economic slowdown" on smaller institutions, said Fred A. Cummings, analyst at McDonald & Co., Cleveland
The Standard & Poor's bank index was up 2.02%, and the Dow Jones industrial average rose 1.08%. The Nasdaq bank index increased by 0.11%, and the S&P 500 rose 1.05%.
Some regional banks are being unfairly hurt by the earnings apprehension, analysts said.
On Monday, Mr. Cummings reiterated an "aggressive buy" for Cincinnati- based Star Banc Corp., which rose 25 cents, to $57.3125.
Mr. Cummings said net income growth will remain strong at Star Banc, which operates in Indiana, Kentucky, and Ohio, and that shares should hit $70 within 12 months. "Management's goal is to deliver superior earnings per share growth relative to regional peers."
Shares of Fidelity National Corp. rose 62.5 cents, to $9.625, on Monday after Raymond James & Associates, which brought the banking company public last week, initiated coverage with a "buy" rating.
Analyst Richard X. Bove sees Fidelity National's shares hitting $15 within 12 months, because of its ability to turn itself around with help from the offering and new top management.
Also, $600 million-asset Fidelity National is a potentially attractive takeover target in fast-growing Atlanta, Mr. Bove said.
Shares of some smaller banks are overpriced, analysts said, and declines are inevitable.
Shares of Commerce Bancorp, Cherry Hill, N.J., fell $1.125, to $45.0625, on Monday after David C. Stumpf of A.G. Edwards & Sons reduced his rating to "maintain" from "accumulate."
The move was based on the shares' dramatic run-up of 17% since mid- November, Mr. Stumpf said.
He did warn that earnings could be affected next year if rates continue to fall. Commerce's rapid deposit growth makes it "more dependent than most banks on the securities market for yield," he said.