Hawkeye Bancorp. is moving to boost fee income - but at least one analyst says the effort is not enough.

Anthony A. Lombardi, who follows the $1.9 billion-asset Hawkeye for Dean Witter Reynolds Inc., recently gave the stock a neutral rating. In a report he tells investors to hold off buying Hawkeye because the stock is too expensive. The Des Moines-based concern was trading at $20.625 on Monday, or 11 times Dean Witter's 1995 estimated earnings per share.

"There are other opportunities in the [Dean Witter's] group," he said in an interview.

Mr. Lombardi likes Salt Lake City-based Zions Bancorp, Star Bane Corp., Cincinnati; and First Commerce Corp., New Orleans, because they have strong earnings and much lower price-to-earnings multiples.

Fee Income Found Wanting

In the report, Mr. Lombardi criticizes Hawkeye for not generating enough fee income.

"Noninterest income's contribution, relative to capacity, is weak compared with other regional banks in our universe, and is a primary factor behind Hawkeye's low relative profitability ratios," he wrote.

Hawkeye ranked 19th out of 30 banks in Dean Witter's universe in percentage of revenue generated by fee income.

"More urgent, the bank ranks last in terms of overall profitability," the report stated.

Hawkeye reported second-quarter earnings per share of 44 cents, representing a year-over-year gain of 4.8%. Dean Witter estimates the company will earn $1.75 per share for the year, and $1.90 for 1995.

The company also returned 1.27% on average assets and 14.75% on average equity.

Apples and Oranges

A spokesman for Hawkeye said Mr. Lombardi's report compares the bank with much larger institutions that do well generating noninterest income because they offer many products and services.

"We don't compare ourselves to the Chase Manhattans," said the spokesman. "This is one investment article out of some 13 analysts who follow us. We have others who have us at a 'buy' too."

The spokesman said the company will offer broker-dealer services next month to customers. But Mr. Lombardi doesn't think it will mean an immediate kick to the bottom line.

As for performance, the company spokesman said Hawkeye has the highest ROA of Iowa bank holding companies.

"Within our peer groups we do measure up," he said.

Mr. Lombardi praised Hawkeye for its strong capital position, few loan problems, and 9.3% loan growth in the second quarter from the prior year.


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