Shares of Chase Manhattan Corp., Citicorp, and First Chicago NBD Corp. gained Monday after being named to the "Focus List" of Credit Suisse First Boston.
In adding the banks to the firm's list of most promising investments, analysts Michael Mayo and Bradley Ball lifted their price targets for the banks by 10% and singled out Citicorp for an upgrade to "strong buy." Chase rose $3.8125, to $120.75; Citicorp gained $2, to $128; and First Chicago was up 81.25 cents, $77.4375.
The Credit Suisse analysts said the banks are taking necessary steps to increase value by streamlining management, reducing costs, and making the most of their branches and technology.
Citicorp is convincingly handling its exposure to Asia and also "has a solid footing to become the only truly global retail bank," the analysts said. For instance, in Asia, Citicorp is moving forward with services like branchless banking, credit cards, and target marketing to the region's growing middle class.
The upbeat prognosis came on a day when merger news, including Regions Financial Corp.'s deal for First Commercial Corp., helped bank stocks shake off a downdraft in the markets. Regions' Financial closed at $39.125, down $1.375, and First Commercial fell $2.0625, to $64.8125, on word of the $2.7 billion stock deal.
The Standard & Poor's bank index rose 0.60%, and the Dow Jones industrial average lost 0.11%.
The Nasdaq bank index was up 0.32%, and the S&P 500 lost 0.17%.
First Merchants Corp. rose 37.5 cents, to $37.75, after McDonald & Co. initiated coverage with a "buy" rating and set a 12-month price target of $44.
The $1 billion-asset Muncie, Ind., banking company has a strong capital base, a proven track record of earnings increases, and operates a solid, profitable trust company, analyst Ross Demmerle said.
First Merchants is also shareholder-friendly, maintaining a dividend yield of 3%, repurchasing stock, and using acquisitions to expand, Mr. Demmerle said. Additionally, the company is trading without an "imbedded" takeout premium, he said, so the price will hold up even if the bank fails to find a merger partner as consolidation continues.
FCNB Corp. lost 50 cents, to $30, despite a move by investment house Ferris Baker Watts to up shares to "accumulate" and set $33 as a 12-month price target.
The $900 million-asset banking company is positioned to increase earnings by 15% this year through improving asset yields and internal growth, said analyst Collyn Bement.
The Frederick, Md., company is also one of the few community banks in its market to offer full financial planning services in the form of asset allocation accounts, mutual funds, and tax planning, Ms. Bement said.
The financial planning and investment services division, added at the end of last year, is likely to increase the bank's fee income by $300,000 to $400,000 this year, Ms. Bement estimated.