The perennial debate over how much disclosure serves a bank's interest goes on, occasionally tweaked by surveys that attempt to reinforce one consensus or another.

This time, First Manhattan Consulting Group has marched onto the stage, armed with results of a brand new survey. The conclusion, based on input from 45 institutional investors and analysts: Banks could raise stock prices by disclosing results for each business unit.

By wide margins, respondents favored more disclosure. For example, 100% said that line-of-business results are "more valuable" than consolidated bank holding company information, while 79% agreed that disclosing how business units performed can lead to a better rating.

Banks Still Reluctant

At first blush, more disclosure sounds like a no-brainer for any bank that wants to lift its stock price. But apart from a few exceptions, banks have been slow to set aside the fear of accounting nightmares or of handing too much data to the competition.

"Banks generally don't do this, and yet there is overwhelming agreement it would be useful to investors," said James M. McCormick, president of First Manhattan Consulting Group. His firm, he said, has helped 15 of the top 50 banks expand business unit reporting.

He said banks could use the results to convince analysts they have an overall strategy to reduce unprofitables lines of business and focus on the profitable.

Stronger Return on Equity

He said that banks can improve return on equity and share price by accounting for separate business lines internally.

"We know of banks that have used systematic management techniques to move from substandard overall returns on equity of 10 to 12% to levels of 14 to 16% or better. Others, starting with a more attractive business mix, have moved from around 15% to near 20%," FMCG said.

A small but growing number of banks are identifying discreet business activities, such as branch banking, credit cards, middle market, trust and commercial real estate lendings. Their financial reports allocate capital, overhead, charges or credits for funds and provisions and reserves for possible losses to each unit.

This sort of information is generally less clear for banks than for nonbanks.

Judging a Black Box

"When you look at a manufacturing company producing widgets and thumbtacks you can see its strengths and weaknesses," said Norman Jaffe, an analyst for Fox- Pitt Kelton who was among those surveyed. In contrast, an analyst reviewing bank results often is presented with "a homogeneous black box," said Mr. Jaffe, an advocate of greater disclosure.

Some banks have grudingly released more information in response to an "investor outcry" over unpleasant surprises in such areas as highly leveraged transactions and commercial real estate. "The point is, uncertainty breeds volatility and volatility breeds investor disappointments," he said.

The "subjectivity" of analysts judgment is discounted by the market and explains in part why bank stocks trade at lower multiples than others, he said.

Some that Have Succeeded

Analysts said a handful of companies have made progress in line-of-business reporting, or at least in breaking down their business results georgraphically. Mellon Bank, First Interstate, KeyCorp, Amsouth, Fleet/Norstar, and SunTrust Banks are among them.

In general, the current reporting is woefully inadequate, the respondents said. The vast majority said current line-of-business reports range from "sort of useful" to "not good enough to be useful. Only 3% called current reports "very valid and useful."

Agreement on Quantity

Investors generally agreed that banks with $50 billion or more in assets should provide results for 10 to 20 lines of business. For smaller banks, they said, data on three to five units should be provided.

Ronald I. Mandle of Sanford C. Bernstein & Co., didn't recall filling out the questionnaire, but agreed generally that more disclosure is better. He argued it was not the driving factor in share price, however.

If a bank does well, its stock goes up, if it does poorly its stock goes down. Business unit reporting might make a difference only at the margins, if at all.

Shares in J.P. Morgan & Co., for example, have performed well despite a lack of detail in the company's reports.

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