Executives of Bankers Trust New York Corp. have long complained that their company plays second fiddle to J.P. Morgan & Co. in the minds of investors.
Though the two have carved out strong reputations as wholesale banks, the venerable Morgan enjoys higher credit ratings, a spot in the Dow Jones Industrial Average, and a stern image of stability among borrowers and investors.
In recent months, however, the market has been giving the edge to Bankers Trust.
Though investors tended to shun both banks earlier in the year - shifting their focus from strong banks to undervalued turnaround candidates - they have been quicker to return to Bankers Trust.
Higher Bounce
Since hitting a 1992 low of $51.37 a share on April 8, the stock of Bankers Trust climbed 12.9% to close at $58 last Friday.
By contrast, Morgan rose 9.3% to $57.37 a share at the end of the day on Friday from its 1992 low of $52.50 on April 8.
"Bankers Trust is getting a bit more sex appeal than Morgan," said one bank stock trader.
Morgan closed Monday at $57.25, off 12.5 cents, while Bankers Trust closed at $57.375, down 62.5 cents.
Morgan may still be suffering from a $50 million loss in the first quarter related to mortgage-backed securities trading, an event that sullied its reputation for prudence.
The slip led some investors to question Morgan's increasing emphasis on securities and derivatives trading, a doubt that has long tarnished Bankers Trust's stock performance.
Corrective Measures
A Morgan spokesman said the company has taken steps to improve its mortgage trading controls, though he declined to elaborate.
"I think that [loss] kind of hurt its image of being an astute, shrewd trading house," said Richard Pike, vice president at Chancellor Capital Management.
Bankers Trust, by contrast, took investors by surprise when it reported solid if unexciting first-quarter results that were unscarred by trading losses. Bankers' stock had fluctuated throughout the quarter on rumors of big losses from swap contracts with Japanese companies. When it reported first-quarter trading profits of $216 million - versus $165 million for Morgan - the rumors ended.
"Fears about losses on swaps were overdone," said Raphael Soifer, an analyst at Brown Brothers Harriman & Co.
The Olympia Connection
Publicity about Morgan's role in the Olympia & York workout also has concerned investors. Bankers Trust has no loans outstanding to Olympia, though it has some exposure to Mountleigh Group PLC, a troubled British developer that is in receivership.
That company's problems, however, have garnered much less publicity than Olympia's.
To be sure, one of the reasons for Morgan's relative stock lassitude is that its results are being compared with its stellar performance in 1991.
The bank had record trading profits last year, and net interest revenue of $1.484 billion was its highest since 1988.
"Morgan may have a down year because 1991 was so good to them when interest rates came down," said Charles Vincent, a vice president at PNC Financial Corp.
Morgan Has Capital Edge
Both bank companies boast strong capital ratios. But Morgan's 10.7% total risk-based capital was more than a point below Bankers' 11.75%.
And from a value standpoint, Bankers Trust's shares look like a better bargain, said Alison Deans, an analyst at Smith Barney, Harris Upham & Co.
Morgan's shares are trading at 10.2 times analysts' average forecast for 1992 of $5.61 a share, while Bankers' shares are 7.5 times expected earnings.
Taken from another angle, Morgan's stock price is 1.9 times its book value, while Bankers Trust's is 1.6 times book value.
