Second Wind for Manufacturers National

The stock of Manufacturers National Corp. recaptured upward momentum this week following a dip that knocked the price off its 52-week high.

After climbing $3 since Tuesday, the stock closed Thursday at $35.5, up $1 for the day, continuing to outperform most other bank stocks.

But even at the current level, analysts consider the bank a better bargain than two equally high-performing Detroit neighbors, Comerica Inc., and NBD Corp.

"It has been a great performer," said Bruce Herring, portfolio manager for Fidelity Investment's Select Financial Services fund. The $50 million fund is among the biggest institutional holders of Manufacturers National's stock.

Profit Taking Blamed

Mr. Herring and others said a 2-for-1 stock split on Aug. 15 was not a reason for the price dip. Instead, they blamed the dip on investors cashing in their gains. On Tuesday the stock fell to $32.50, a week after hitting $37, a 52-week high.

The run-up this week at Manufacturers National reflects bargain hunting by investors who have come to recognize the bank as a solid performer, much like its Detroit neighbors.

All three banks are conservative lenders. Manufacturers National, for example, has about 3% of its loan portfolio in construction. The trio has a consistent track record of rising earnings and return on equity in the mid to high teens.

Successful Trio

"Those three Detroit banks are doing well - they will all come through the recession with their earnings intact," said Chris Kotowski, an analyst with Oppenheimer & Co. in New York.

Another reason for the stock's recent high, said Mr. Herring is that the stock is undervalued. The shares of most regionals, including the other big Detroit banks, sell at 10 times 1992 earnings. Manufacturers, said Mr. Herring, sells at slightly less than nine times.

"It's a real buy," Mr. Herring said. "It's a discount compared to the rest of the group and it has better fundamentals."

According to Mr. Herring, investor's perceptions of the bank have improved. Investors have recently realized that the company is trading at the low end of bank ranges, given its high earnings growth and dividend.


He said the book value is slightly below average for a quality company. Mr. Herring said 1992 per share earnings should exceed $4.

The bank continues to do well. Manufacturers National's per-share earnings have risen from last year. In the second quarter, for example, earnings were $1.85, compared to $1.71 the previous year. Return on equity, too, has risen for the first half of the year, to 15.1%, compared to 14.7% for the first six months of 1990.

That consistent, sound performance kept the stock from dropping greatly last fall, when bank stocks drop faster than a pebble in a pond. Manufacturers dropped to around $18 from $25.

"Detroit banks are among the best performers in the country," said Mr. Kotowski.

Fidelity, for instance, has been buying Manufacturers National stock for the past year.

One more factor may be attracting investors to Manufacturers stock: the promise of acquisition.

"There are four big banks in Michigan," said Mr. Kotowski. "There is easily room for consolidation."

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