Signet Banking Corp. shares have jumped about 5% since an analyst boosted his 1993 earnings forecast for the bank.
On Monday, the Richmond, Va., bank's stock was ahead 75 cents, to $42.375, in late trading. That was the best gain of the session by a major bank issue.
Last Thursday, Thomas K. Brown of Donaldson, Lufkin & Jenrette Securities Corp. hiked his forecast of 1993 earnings by 35 cents, to $4.40 per share, and reiterated his "very attractive" rating on the stock.
Among Top Performers
In fact, Signet has been among the best performing bank stocks of the year, gaining 90.5%. By comparison, the average price gain for the shares of the 50 largest banks as of early November was 32.6%, according to Montgomery Securities.
Signet has made a striking recovery since it lost 95 cents per share in 1991, following a sharp rise in commercial real estate problem loans in its market.
The latest sprint by the stock occurred after the company announced third quarter earnings of $1.02 per share, far ahead of the 41 cents earned a year earlier and well above the First Call consensus estimate of 90 cents. First Call is an affiliate of American Banker.
|A Very Good Job'
"Signet's management has done a very good job of maximizing the value of their franchise," Mr. Brown said Monday. "They launched a preemptive strike against credit costs, managed noninterest expense very well, and focused on the business they could grow, credit cards."
Mr. Brown also thinks Signet is a likely acquisition candidate for a major superregional bank in the next 18 months.
Other Wall Street analysts have also raised their earnings estimates for the company, though not by as large a margin as Mr. Brown.
Thomas D. McCandless of Goldman, Sachs & Co. recently raised his 1993 estimate to $4.40 from $4.10. Meanwhile, Richard Stillinger of Keefe, Bruyette & Woods Inc. raised his estimate for this year to $3.80 from $3.50 "with a bias toward raising" next year's estimate of $4.25.
Expense Growth Checked
Mr. McCandless noted that noninterest income rose 14% and net interest income increased 6% during the third quarter, "both higher than anticipated." Meanwhile, he said, expense growth was held firmly in check, declining 1.5%.
The Goldman Sachs analyst described credit quality as "very well behaved" during the third quarter. Still, he expects "resumption of higher losses in the current quarter" and "continued high levels of nonperforming real estate assets."
Nonperforming assets were equivalent to 4.39% of all loans plus other real estate owned on Sept. 30, down sharply from 5.78% a year earlier.
But Mr. McCandless thinks earning estimates for 1994 at Signet could exceed $5 per share and believes the stock should be trading at about 10 times earnings. That would mean a price of $44, based on his prediction of next year's earnings.