Money-center bank stocks took flight on Tuesday as the Federal Reserve Board's Open Market Committee met without taking action on interest rates.
Chemical Banking Corp. rose $1.375 to $47, BankAmerica Corp. $1.25 to $51.75, Bankers Trust New York Corp. $2.25 to $60.875, and Bank of New York Co. $2 to $39.25.
The results were no surprise, given the inaction by the Fed. Analysts noted that among banks, money-centers tend to attract the most investors when rates stabilize or decline.
As a group, banks easily outpaced the market. The Standard & Poor's Corp. index of banks rose 2.11%, while the entire S&P rose a more modest .94%.
In other news, Interstate Johnson Lane upgraded Synovus Financial Corp. to "buy" from "hold." Shares of the Atlanta-based bank rose 12.5 cents to $20.875 on volume of 21,000. Average daily volume is 32,000.
Analysts John J. Mason, Christopher Marinac, and Darren Short praised the company for its 80.8% stake in Total System Services, the second- largest credit, debit, and private label card-processing company in the world.
The analysts also praised Synovus' recent acquisition in South Carolina as nondilutive, and said the bank is poised for more growth in that area.
"The company carries a competitive advantage in bidding for other banks with its high multiple currency," they said. "Thus, Synovus has the ability to grow its earnings and assets through 'nondilutive' bank acquisitions."
As a result, the analysts predicted Synovus could reach $26 in the next 12 to 18 months.
But Salomon Brothers' Andrew Brown cautioned that by expanding its core bank system, Synovus runs the risk of diluting its more valuable stake in Total System Services.
Before Synovus bought $1 billion asset NBSC Corp. in South Carolina, TSS contributed 23% to Synovus' earnings, he said. This year it will contribute 19%, he said.
Mr. Brown, who has a "hold" on the stock, said he is still very high on the company, but thinks its current price represents a full valuation of the business.
Banc One Corp. rose $1.375 to $34 in anticipation of an analysts' meeting today where the Columbus, Ohio-based bank is expected to outline its new, more centralized strategy.
Under the new strategy, Banc One will centralize more functions, bringing more of its acquisitions under Columbus' control.
Currently Banc one has 69 chartered banks in 12 states. Once interstate banking is law in 1997, the company will trim that to one bank a state, and eventually to one bank overall.