Shares of Bank of New York Corp. could move more than 10% higher in the coming months, an influential banking analyst said.
The stock, which closed trading Wednesday at $35.9375, up 62.5 cents, is positioned to hit $42 over the next year, said Henry Dickson of Salomon Smith Barney, who initiated coverage with an "outperform" ranking.
Mr. Dickson joins a considerable list of analysts who single out Bank of New York as one of the industry's top long-term prospects because of its multifaceted approach to banking.
But not everyone is as bullish. Gerard Cassidy at Tucker Anthony recently downgraded the stock to "market perform" from "outperform," saying that shares have reached his near-term price target.
The longer outlook for the banking company "remains strong," Mr. Cassidy said.
Analysts applaud the company for mixing strong securities processing businesses with leadership or near-leadership positions in more traditional banking lines. "Expected strong operating performance and significant level of free capital flow, as well as the attractive business profile," make the stock a continued buying opportunity, Mr. Dickson said.
Bank of New York is likely to generate more than $1.2 billion of net income in 1998 and sustain more than 10% annual growth after that, some analysts say.
Return on equity-a chief indicator of profit potential-is a solid 25% and internal capital growth exceeds 15% annually, Mr. Dickson said.
The assessment came as many regional bank stocks were bucking the downtrend in the overall market.
The Standard & Poor's bank index was up 1.20% and the Dow Jones industrial average lost 0.76%. The Nasdaq bank index shed 0.09% and the S&P 500 was off 0.34%.
Corporate shares continued to tumble on earnings disappointments, with Boeing Co. and Sears, Roebuck and Co. on Wednesday becoming the latest corporations to say they would not meet expectations.
The shortfalls are renewing calls by some economists that a downturn looms.
A recession will occur in 1999, because fundamentals for global and domestic economies have not improved, said David Levy, director of forecasting for the Jerome Levy Economics Institute.
"An analysis of the latest financial, tax, demographic, and other relevant data leads to that conclusion," Mr. Levy said "An extremely low savings rate reflects an extraordinary and unsustainable consumer binge."
Banks are less likely to disappoint on the earnings front and analysts said that sentiment helped lift regionals. Fifth Third Bancorp added $2.15, to $68.27; First Union Corp. $2.0625, to $63.0625; and Mellon Bank Corp. $2.5625, to $65.625.
Unionbancal was off 50 cents, to $98.3125, after Bradley Ball of Credit Suisse First Boston initiated coverage with a "hold."
As the largest remaining independent bank headquartered in California, Unionbancal "is well positioned with market share leadership in key growth markets," Mr. Ball said. But the company, which is majority owned by Bank of Tokyo-Mitsubishi, "has been less shareholder-focused" than its peers, he said.
Bankers Trust shares were down 37.5 cents, to $86.1875, on news that lawyers for Holocaust victims asked the Federal Reserve Bank of New York on Wednesday to block Deutsche Bank's acquisition of the New York bank until the agency can thoroughly review whether the German bank collaborated with the Nazi regime. It also should condition approval on the German bank's return of Holocaust victims' assets, the lawyers said.