Squall Hits Smooth-Sailing Boatmen's

After outperforming its peers in recent weeks, the stock of Boatmen's Bancshares fell sharply early Tuesday before recovering a bit later in the day.

In the absence of any adverse news or significant block trades, analysts attributed the unexpected drop to broad profit taking. Within one hour of the opening bell, Boatmen's price tumbled $1.25, to $44.50. They recovered a bit during the day but had settled back to $44.625 as of 3 p.m., down $1.125, in moderate trading.

Meanwhile, other banks in Boatmen's peer group also fell.

Comment on Price Action

Phil McCarty, senior vice president of investor relations at Boatmen's said Tuesday's drop was probably a matter of his bank's catching up with its peers.

Last week Boatmen's shares were steadier, declining only 0.3% as a national group fell 1.5% and a group of Midwestern banks fell 2.5%.

The price swings may be leading to a leveling in price as investor enthusiasm about bank stocks wears off.

Even the well-regarded banks are in for some reappraisal. Boatmen's, which is well-positioned in Missouri and surrounding states, currently trades at a multiple slightly higher the bank average of 10 times earnings.

Change in Status

"I downgraded it from |buy' to |hold' last month," said George Salem, analyst for Prudential Securities, citing the price-earnings ratio. The shares are trading at 133% of book value, compared to an industry average of about 102%, added Lisa Todaro, analyst at SNL Securities.

Similarly, Dennis Laplante of Fox-Pitt Kelton in New York cited CoreStates and PNC Financial Corp., as strong banks whose shares have have dropped faster than Boatmen's in recent weeks.

Some Negatives Noted

To be sure, the analysts all issued caveats amid praise for Boatmen's. Mr. Salem, for instance, said the bank could be hurt by problems in the automobile, aerospace and defense industries that make up much of St. Louis' economy.

And Ms. Todaro said the company faces stiff competition from other strong banks in the region.

But generally, a positive view on Boatmen's prevailed.

Desirable Traits

Indeed, Virginia A. Adair of Merrill Lynch said a correction could create another buying opportunity in the stock.

The bank, she said, has the characteristics Merrill seeks in a bank:

* It has a fee-generating trust division that dominates with a 40% market share.

* Its credit quality remains relatively strong - SNL noted nonperforming assets are about half the industry average at 1.84% of assets.

* It is cutting its expense ratios by changing its mix of assets and through in-market acquisitions that have presented opportunities to merge back offices and branches.

Jump in Earnings

Mr. Laplante said the Boatmen's earnings per share, which had been flat since 1984 because it overpaid for market share and suffered some dilution, are suddenly surging.

Last year, the bank ranked 11th among more than 120 followed by Fox-Pitt, declining only 0.4% in earnings in a bad year for bank stocks.

This year's earnings jump of 43% is in the middle of the pack, Mr. Laplante said. But he also predicted sharp earnings growth to $4.50 a share, from about $4.10 for 1992.

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