Citicorp's shares soared Wednesday, leading a rally in banks and other stocks.
Helping spark the rally was industry analyst Arthur P. Soter of Morgan Stanley, Dean Witter, Discover & Co., who raised his price targets on Citicorp, Chase Manhattan Corp., and BankAmerica Corp. He said he did so because of the recent decline in interest rates.
Citicorp, already bolstered by recent nods from Merrill Lynch & Co. and Sanford C. Bernstein & Co., got the biggest boost. Its stock rose $5.25 a share hitting yet another 52-week high of $139.875.
Mr. Soter raised his target on the money-center bank to $166 per share, from $157, maintaining a "strong buy" rating.
Citicorp has gained more than $15 a share in six trading days on analyst upgradings and market anticipation of a huge cost-cutting initiative. The company is expected to reduce expenses by 10% to 15%, according to Sanford C. Bernstein analyst Ronald I. Mandle, and $1 billion to $1.5 billion of savings over several years may be possible. "We believe plans for such a program are well advanced," he said.
Chase, another darling of the money-center analysts, rose $2.325, to $111.93.
Matt Byrnes, president of Keefe Managers Inc., a New York-based hedge fund, called Chase "the best value of the top 100 banks." He said it boasts the lowest price-to-earnings ratio, one of the best management teams in the industry, and leading-edge technology.
Last year's merger with Chemical Banking Corp., Mr. Byrnes said, was one of the few industry deals that "exceeded every stated goal from return on equity to earnings per share, efficiency ratios, and revenue growth."
Mr. Mandle called Chase's stock "cheap" and said it has underperformed the group. He added, however, "the stock should get going again."
Mr. Soter raised his target on Chase to $125 a share, from $119, maintaining an "outperform" rating.
The recently split shares of Bank of America rose 87 cents on the day, to $72.75. Mr. Soter revised his price target on the San Francisco bank to $81, from $79, with an "outperform" rating.
BankBoston Corp., another big gainer, rose $3.125 to $87.562.
Bank stocks were leaders of the rallying stock market after Tuesday's fall. The Standard & Poor's bank index rose a robust 9.74, or 1.65%, to 601.51, topping the 600 mark for the first time, while the S&P 500 gained 7.95, or 0.83%, to 960.32. The Dow Jones industrial average jumped 71.77 points, or 0.88%, to a record 8,259.31, amid investor confidence on earnings growth for the rest of the year and rising bond market prices. The yield on the benchmark 30-year Treasury bond fell for the first time in four days, to 6.48%, down 1 basis point.
The Nasdaq bank index joined in the day's gains, rising 9.2, to 1734.4.
Elsewhere, analyst Timothy Willi of A.G. Edwards, cut Huntington Bancshares to "reduce," from "maintain position," due to its 25% gain Tuesday when it was added to the S&P 500 broad market index. He also cut First Michigan Bank Corp. to "reduce," on price.
"We're always looking for relative value, and Huntington and First Michigan were fully valued at close of market yesterday," he said Wednesday. Mr. Willi suggested that investors move their money into Commerce Bancshares of Kansas City, Mo., and BB&T Corp., Winston-Salem, N.C.