A strong earnings statement by Barnett Banks Inc. won a positive analyst report - for its big southeastern rival NationsBank Corp.

Lehman Brothers' Michael Mayo on Thursday raised his 1996 earnings projection for NationsBank to $8.05 a share from $7.80 and maintained his "strong buy," noting strong earnings trends in the Southeast.

NationsBank's stock rose $2.375, to $72.125.

"The evidence so far of the early reporters shows that it's a good climate for banks," said Mr. Mayo. "As a result, we have greater confidence that the trends in place will continue."

The Lehman Brothers analyst said Barnett has benefited from some of the same factors that will undoubtedly boost NationsBank's earnings.

Mr. Mayo said that a 10-basis-point increase in Barnett's net interest margin and continued strong loan growth are just two of the positives that would also help NationsBank.

"We're not just hanging hat on (earnings results at) Barnett," said Mr. Mayo.

"Everything's looking good with the results right now," said Mr. Mayo.

"Where there's a little bit of gold dust, there's probably gold," said Mr. Mayo, referring to his generally bullish perspective on banks.

The analyst believes that earnings reports are helping to set the stage for price/earnings expansion for all banks.

Specifically, he said, NationsBank remains one of the cheapest banks around.

He added that the concerns about a dilutive acquisition fly in the face of the realities of earlier acquisitions by NationsBank.

Barnett, meanwhile won a rating increase from Ruchi Madan of Prudential Securities, but its earnings report had little to do with it.

Although Ms. Madan said Barnett's earnings statement added to her confident feelings about the bank's ability to improve net interest margins, she said her new rating "wasn't based on earnings.

"The upgrade was based on the fact that the stock has underperformed," she said. "When I initiated coverage of the stock in August, I really liked the story and I really liked the strategy, I just didn't like the valuation."

Ms. Madan said the average price to earnings ratio for regionals has risen recently to 10.5-times from 9.5-times. She said at the time of her upgrade, Barnett's stock price of $56.625 was equal to 9.8 times-earnings, a 7% discount to its peers, when she believes it should trade at a 10% premium to the group. She set a 12-month target price of $66 on the stock.

In trading Thursday, Barnett rose $1.625 to $58.25.

Also Thursday, Edward D. Jones & Co. analyst Michael Ancell said he lowered his recommendation on Banc One Corp. to "buy" from "strong buy" on the basis of recent appreciation in the company's share price. Banc One shares were unchanged at $37.75.

The bank market continued to rally Thursday, with the Standard & Poor's bank index gaining 0.97%, while the S&P 500 gained 0.75%.

J.P. Morgan & Co., which reported stronger-than-expected earnings, was one of the biggest gainers on the day, rising $2.50 to $80.625.

Republic New York Corp. was also one of the big gainers, rising $1.50 to close at $63.375.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.