Another downgrading for Citicorp and diminished enthusiasm for other money-centers kept banks from broadly joining a market rebound Monday.
While the Dow Jones industrial average snapped back from a 130-point morning slide to finish in the black, bank shares ended mainly in the red- demonstrating that financial stocks continued to be among the hardest hit by continued overseas angst.
Citicorp slipped $2.6875, to $112.3125, after Henry Dickson of Salomon Smith Barney removed his "buy" recommendation, citing Asian exposure and "prolonged uncertainty" for that region.
In reducing his ranking to "outperform," Mr. Dickson said Citicorp's "long-term attractiveness has not changed."
But with 56.7% of 1996 net income coming from outside the United States, economic turmoil will dampen earnings and revenue levels, as well as investor interest, Mr. Dickson said.
He also expressed muted support for BankAmerica Corp, BankBoston, and Chase Manhattan Corp.-reiterating "buy" recommendations, but noting increased risks to investors. BankAmerica fell $1.375, to $62.8125, and BankBoston closed at $87.875, down 37.5 cents.
BankBoston dipped despite a recommendation to "accumulate" from "maintain position" by Diana Yates of A.G. Edwards & Sons. She said the banking company was getting an unfair drubbing that failed to consider "strong earnings potential and a very smart focus on allocating capital to business lines."
Shares of Chase Manhattan fell to $99.25 in the morning-their first time below $100 in eight months-before regaining ground and closing at $102.50, up 62.5 cents.
Mr. Dickson's tone echoed that of Merrill Lynch & Co. analyst Judah Kraushaar, who last week downgraded Citicorp and reduced earnings estimates for other large banks, citing overseas concerns.
For the day, the Standard & Poor's bank index rose 0.37%, and the Dow Jones industrial average gained 0.88%. The Nasdaq bank index dipped 0.69%, and the S&P 500 was up $1.25%. All markets opened the day down, after Hong Kong's stock index dipped by 9% and a leading indicator for Japanese stock movement was off 2%.
Bank shares' recent slides-six days in a row-have industry observers split over how long, or even if, there will be a bear market for financial institution shares.
Banks are in for a rocky run, said Thomas D. McCandless of Natwest Securities.
"Everyone has lingering concerns about Asia's impact on the banking industry." People have also awakened to "the flat yield curve that's been with us for a while," he said.
He was referring to pressure on profits from tightened spreads between long- and short-term rates.
But Ms. Yates of A.G. Edwards is less grim. "We're going under the assumption that bank shares have been beaten down unjustly," she said.
Shares of some stocks acted independently of the Asian overhang. For instance, NationsBank stock was off 87.5 cents, to $58.125, after the company lowered by $150 million its cost-savings estimates for its purchase of Barnett Banks Inc.
First Chicago NBD Corp. ended the day at $37.4375, up 6.25 cents.
The banking company is said to have some exposure to a large Hong Kong investment bank that shut its doors on Monday.
But at the same time, Everen Securities raised its ranking for First Chicago to "outperform" from "market perform."
FirstStar Corp. was up 6.25 cents, to $37.4375, after Everen Securities raised its rating to "outperform" from "market perform."
First Commercial fell 50 cents, to $58.25 after being cut to "hold" from "buy" by John B. Moore of Morgan Keegan. Just a month ago Mr. Moore reduced shares to "buy" from "aggressive buy."