FleetBoston Financial Corp. is the latest large regional banking company to come under scrutiny for its exposure to capital markets and private equity markets, but it is faring better than most in the eyes of Wall Street.
In a research note Friday, Lori Appelbaum, an analyst at Goldman Sachs Group, estimated Fleet would report a 50% decline in fourth-quarter private equity activities and a 25% drop in equity underwriting from third-quarter levels. Recently, similar forecasts made by banking companies themselves have sent financial shares into a tumble. But Fleet's case may be different. Ms. Appelbaum wrote that the company would offset its weaknesses with a strong quarter in merger and acquisition advisory activities, other types of underwriting, and revenues from credit cards and trading activities.
Unlike other companies, notably Bank of America Corp., Fleet does not appear to be struggling with problem loans, Ms. Appelbaum wrote.
"Fleet has very actively managed credit risk in terms of early identification and writedown of problem loans," and it should experience more moderate trends with rising nonperforming loans than its peers, she wrote.
Fleet's stock rose 25 cents Tuesday, or 0.68%, to close at $36.625.
After wobbling earlier in the day, many financial shares rose on a generally upbeat afternoon for the broader markets. Shares of Citigroup Inc. and Chase Manhattan Corp. rose 1.75% and 0.27% to $20.3125 and $45.75 respectively.
The American Banker index of top 50 banks rose 0.87%, and the index of 225 bank stocks rose 1.39%. The Nasdaq composite index fell 0.93%, and the Standard & Poor's 500 index rose 0.71%.
Some analysts said indications that the Federal Reserve Board was concerned about avoiding a recession could improve the pipeline for the investment banking business, which would help the outlook for traditional firms like Lehman Brothers and newer entrants to the market, like Fleet, which owns Robertson Stephens & Co. of San Francisco.
Dean Eberling, an analyst at Keefe, Bruyette & Woods Inc., wrote in a research report Tuesday that the Federal Reserve could "provide the spark needed to jump-start underwriting and the prospects for building earnings momentum, which could provide some relief to the group."
Morgan Stanley Dean Witter & Co. rose $2.3125, or 3.11%, to $76.5625, and Merrill Lynch & Co. climbed $1.625, or 2.56%, to $65.1875.
Meanwhile, Mike McMahon, an analyst at Sandler O'Neill & Partners Inc., initiated coverage of SJNB Financial Corp. of San Jose, Calif., Friday with a first-grade "buy" rating.
Mr. McMahon wrote that the bank holding company has steadily increased its earnings at a five-year compound annual growth rate of 19.1%, while its stock value rose 293% from 1994 through the end of last year, to $30.5 a share.
The company currently is trading at around 14 times operating earnings of $2.51 per share for the first three quarters and 11.7 times Sandler O'Neill's earnings estimate of $3.04 for next year.