Investors have yet to fully reward Mellon Bank Corp. for its asset management business, according to vice chairman Christopher Condron.

Mr. Condron told the Bank and Financial Analysts Association's annual symposium in New York that Mellon's shares have lagged behind those of other asset managers, despite the company's $130 billion of assets under management for institutional retirement plans, wealthy individuals, and other investors.

"We're the third- or fourth-largest asset manager in the country, but we're selling at a bank multiple, which just doesn't compute," Mr. Condron said during a panel discussion Wednesday afternoon.

By Mr. Condron's reasoning, Mellon's stock should trade for close to the 20-times earnings that shares of the most highly regarded asset managers command. Instead, the Pittsburgh banking company's shares trade at less than 14 times projected 1997 earnings.

Analysts acknowledged that asset managers generally commands higher multiples than banks but added that that doesn't mean Mellon's share price should match the industry leaders'.

"I understand where he's coming from," said Dennis Laplante, an analyst at Fox-Pitt Kelton, "but asset management doesn't represent the same proportion of Mellon's earnings as it does in some of the purer players."

Mr. Laplante said Mellon should trade at 13.9 times estimated earnings of $5.65 per share in 1997, or $78.535. Its shares were at $77.875 Thursday. The banking industry trades at about 13.5 times earnings, Mr. Laplante said.

Mr. Condron, who is also chief executive of Mellon's mutual fund subsidiary, Dreyfus Corp., laid out the banking company's asset management business as part of the three-day conference's panel discussion on "Winning the Asset Management Race."

(See related article, page 7.)

He asserted that Mellon has brought Dreyfus a long way since 1994, when it paid a hefty $1.8 billion for a floundering fixed-income shop.

Dreyfus introduced 13 stock funds in 1995 and 1996. And Mr. Condron said he has high hopes for the "Lion Account," a comprehensive financial service product that combines a checking account with investing services. It was unveiled in December.

Moreover, Dreyfus funds' performance has improved. Of its 175 portfolios, 45 finished 1996 in the first quartile, "putting Dreyfus for the first time ever in the same club as Vanguard, T. Rowe Price, or Putnam Investments," he said.

Mr. Condron added that Dreyfus had increased its sales conversion rate from 5.8% in 1995 to 10% in 1996. He acknowledged that most fund companies turn 30% of inquiring investors into customers.

Dreyfus has carved out shelf space at PaineWebber Inc. and in Smith Barney's no-load fund program, where Dreyfus has become the second-best seller, Mr. Condron said. Mutual fund sales through brokers at the end of 1996 were up 65% from 1995. "These new distribution channels are starting to make a difference," he said.

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