BankAmerica Corp. stock surged Tuesday after the company's chief executive said its 1996 earnings and revenues could dramatically exceed Wall Street forecasts.
In an interview with Reuters in Sydney, Australia, at the International Monetary Conference, BankAmerica's David Coulter said annual earnings could grow 20% this year, to $7.75 per share, or 57 cents a share more than analysts' consensus projection.
The bank's revenues could grow 9% in 1996, he said, nearly $1 billion more than Wall Street was expecting.
Trading of BankAmerica stock had to be halted for 29 minutes at the beginning of the day on the New York Stock Exchange because of heavy demand. The stock opened at $78 a share - $3 higher than Monday's closing price, with an initial 432,600-share block trading to boost the price.
The stock closed at $76.50, up $1.50. Trading volume of 2.4 million shares was nearly twice the daily average. In terms of the total value of shares changing hands, BankAmerica was the 12th-most-actively traded stock on any U.S. exchange.
News of Mr. Coulter's comments helped bank stocks in general shake out of a two-week slump. The Standard & Poor's index of major banks rose 1.25%, outpacing the S&P 500 index, which rose 0.73%.
Mr. Coulter and Citicorp chairman John Reed each presented a positive picture of the banking environment, telling the conference they did not expect interest rates to rise much further.
Wall Street was divided on whether San Francisco-based BankAmerica's shares, helped by an expanding California economy and aggressive share repurchases, would do as well as Mr. Coulter seems to expect.
Katrina Blecher, an analyst at Gruntal & Co., said she expects soon to raise her $7 per share estimate of 1996 earnings, based on the comments.
"This is wonderful," she said. "It shows the Street hasn't given credit to the BankAmerica story. A lot of people, including myself, were looking for very modest revenue growth, but now it seems the bank has fully rebounded from its problems" with high overhead and credit costs and a sluggish state economy.
But Thomas F. Theurkauf, an analyst who covers the bank for Keefe, Bruyette & Woods Inc., was skeptical that the company could increase its revenues 9%, and he said he plans to stick to his $7.20 per share estimate for 1996.
"I think this is much ado about nothing," he said. "I am leery" of expecting "that kind of revenue growth from the bank."
A BankAmerica spokesman said Mr. Coulter, who has been CEO since January, was not making a prediction but commenting on the "salutary effects" of the company's cost cutting.
According to Reuters, Mr. Coulter said of his company, the third-largest U.S. bank: "If you keep your expense at a 1% growth rate, which is what we had in the first quarter, a 9% revenue increase then turns into a nearly 20% operating income increase. So can we continue to do that, I think, yes."
Mr. Coulter also indicated the bank may close or streamline some of its more than 200 branches in Texas, which he conceded were underperforming.
The bank's revenues grew by 9% in the first quarter compared with the same period of 1995, but the increase was aided by a one-time gain on the sale of a securities processing unit.
Before Mr. Coulter's comments, analysts' consensus on 1996 earnings had been $7.18 a share, according to Zacks Investment Research. That would be an 11% increase from 1995.
Most analysts had predicted 1996 revenue growth in a modest 4% to 5% range. The company's revenues were $20.5 billion last year, so 9% growth would add $1.9 billion, instead of the roughly $1 billion analysts are forecasting.
Fueling the company's positive outlook are a rebounding California economy, strong Latin American operations, and continued aggressive share repurchases. Mr. Coulter told Reuters the bank is buying back roughly $300 million of stock per quarter.
The key issue will not be revenues, however, but whether BankAmerica can weed out unprofitable businesses that have kept its return on equity below those of its peers, said Michael Stead, a manager at SIFE Trust Fund, which owns 280,000 BankAmerica shares.
In the market Tuesday, the 30-year Treasury bond rallied, and its yield dipped below 7% on reports of sluggish retail sales and manufacturing output. The long bond was trading at 6.97% by midday after opening at 7.03%.
Fleet Financial Group gained $1 to $44.625; Mellon Banking Corp., rose $1.25 to $55.375; Signet Banking Corp. rose $1 to $26.50; NationsBank Corp. rose $2.375 to $84; and Mercantile Bancorp. rose $1.25 to $47.75.