SAN FRANCISCO - Hancock Institutional Equity Services analyst James M. Marks initiated coverage of Union Bank with a "buy" rating.
Mr. Marks said the bank is undervalued. With a current price- earnings multiple of 8.5, Union Bank is among the lowest in its peer group, he said, adding: "It's the cheapest bank out there I can find."
The buy rating incorporates an estimate of 15% earnings growth for 1996.
Mr. Marks' estimate did not include any benefit from the announced in- market merger with Bank of California, which he said could boost earnings an additional 10%.
The bank, the fourth-largest commercial bank in California, is a double takeover play, said Mr. Marks, either through a sale of its majority stake by 72% owner Bank of Tokyo or through a buyout of minority shareholders by the Japanese bank.
In its announcement regarding the merger, Union Bank said it planned to maintain its minority shareholders. Nonetheless, Mr. Marks said, a buyout of the minority stake remains possible.
Mr. Marks set a 12-month target price of $60 per share, but he said the stock could get to $70 to $80 in a takeover.