Stocks: Boatmen's Bancshares Wins Praise As Safe Harbor in Storms to

Anthony Davis of Dean Witter Monday initiated coverage of Boatmen's Bancshares with an "accumulate" rating, touting the St. Louis-based bank's hefty fee income and conservative lending policies.

With the economy veering towards a downswing, Mr. Davis said, the industry at large could soon face decelerating loan growth and credit quality deterioration. However, "Boatmen's emerges relatively well- positioned in those regards," he said.

With an $18 billion mortgage servicing portfolio, $76 billion of trust assets under management or administration, and a large credit card merchant processing business, Boatmen's derives about 34% of its revenue from fees, Mr. Davis said. That is three to four percentage points more than average, he said.

Mr. Davis said the bank underwrites conservatively, sharply limiting the amount it will lend to any one borrower and avoiding risky loan types.

Only 0.1% of Boatmen's loans are international, Mr. Davis said. Loans for highly leveraged transactions comprise only 0.5% of the portfolio, and realty construction loans account for a modest 4% of the total.

Other analysts have recommended Boatmen's stock as a takeover play. They note that interstate branching rules affecting its home state will be relaxed next fall.

But Mr. Davis said "we don't recommend banks based on (takeover speculation)." Indeed, Mr. Davis suggested Boatmen's could continue its own profitable expansion strategy. He estimated $120 billion of banking and thrift assets are "acquirable" in Boatmen's nine-state region.

"Accumulate" is the second best of Dean Witter's four ratings. Boatmen's shares closed Monday at $32.325, up 62.5 cents.

At roughly 9.3 times trailing 12 months' earnings, Boatmen's shares are below the mid-range trading multiple for the top 50 banks.

Elsewhere, Lawrence W. Cohn of PaineWebber downgraded Chase Manhattan Corp. to "unattractive" from "neutral," saying the money center's shares were already overvalued based on his calculation of normalized earnings.

Chase shares closed at $41.50, off $1.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER