First Chicago Corp. may not spring any surprises with its earnings on Monday, but one analyst believes the Midwestern giant is about to break out of its rut.
"This bank has very much improved prospects for 1995," according to Stephen Berman of Natwest Securities Corp., New York, who last week issued a "buy" rating on First Chicago's shares.
The company's earnings have been "stuck at $1.40 to $1.50 per share per quarter when you normalize them by factoring out venture. capital gains as well as this year's first quarter trading loss," he said.
Mr. Berman said he expects "no miracles" when third quarter. results are unveiled, but also said the company could beat his "conservative" $1.40-per-share estimate.
The stock has not fared well this year, tumbling from a 52-week high of $55 to $41. Much of that loss occurred in September, when its value fell by around 10%. Recently the stock has recovered some lost ground.
On Wednesday, First Chicago's shares were up 62.5 cents to $45.875.
Mr. Berman recently cut his full-year 1994 earnings estimate for First Chicago by 20 cents to $6.30 because of the soft trading and wholesale banking climate.
On the other hand, he raised his 1995 estimate by 20 cents to $7. He expects an improved trading atmosphere and a reinvigorated retail banking effort to give eamings a strong push.
'"The bank thinks it can make $100 million net after taxes by the end of 1997 through improved results in community banking," he said.
"That is roughly $1 a share and I'm saying they will get 20 cents of that next year. It is the biggest reason for the change in my estimates."
While First Chicago is the largest retail bank in its market area, its focus on community banking has been "haphazard," Mr. Berman said. Management has determined to make the area more profitable.
The analyst also thinks First Chicago will continue to fare well in the credit card business with innovative strategies, despite the sharply increased competition in this sector.
"They were a basic inventor of the gold card and they were competitive on price with their cards before others," he noted. "They were growing their pan of the business while others were losing market share."
Mr. Berman lifted his rating on the stock based on both the improved fundamental earnings outlook and its recently depressed valuation.
He believes the stock can reach $60 a share in the next 12 to 18 months, based on its earnings prospects.
In the upcoming full interstate banking era, Mr. Berman thinks First Chicago could be an acquirer of other banks, but not beyond its base in the Midwest.
"I don't get the feeling they want to 'go national' as a bank," he said, "although they already operate nationally in some ways, such as the marketing of their credit cards."
Further down the road, at least two or three years, it is conceivable that the bank could be acquired by a larger outsider, he said.
An intriguing possibility is a bid by a large Canadian bank, he said. Canadian business and banking interests have long been a major factor in Chicago.
"Canada really has too few people and too few businesses to support growth for the large banks it has," he pointed out.
An acquisition of First Chicago could incur local resistance.
It is the largest remaining independent bank left in the nation's third-largest city.
In another upgrade, S.G. Warburg & Co. analyst Francis X. Suozzo raised his investment rating on MBNA Corp. to "buy" from "hold." MBNA was up 37.5 cents to $25 on Wednesday.
Mr. Suozzo said MBNA had sharply accelerated its earnings and credit card receivables growth this year. He raised his 1994 earnings estimate on MBNA to $1.80 from $1.74 a share. He now expects $2.35 a share in 1995, up from $2 previously.