Citing favorable news about its divestiture plans, Alex. Brown & Sons Inc. analyst George Bicher Thursday upgraded his investment rating on Fleet Financial Group to "buy" from "hold."
On Wednesday, Fleet Financial, along with state and federal regulators, unveiled plans to divest $3.2 billion of New England deposits as part of the bank's pending purchase of Shawmut National Corp.
As a result, Mr. Bicher said, the threat of excessive divestitures is now lifted, and Fleet's original cost-savings expectations are still valid. Fleet shares finished up tktk at tktk.
In the months following the February merger announcement, some observers had predicted Fleet might have to divest between $5 billion and $6 billion of deposits.
"The company has not lost the deal economics (that) a larger divestiture would have forced," Mr. Bicher said. "With concerns over the divestiture size now alleviated, we believe the market will soon begin focusing on the earnings momentum that will be created by the cost cutting in 1996."
Mr. Bicher predicted earnings per share would reach $4.55 in 1996, 2% higher than the First Call Corp. consensus estimates of Wall Street analysts, which is $4.47 per share.
On the flip side, Henry "Chip" Dickson, a bank analyst at Smith Barney Inc., said now is not the time to pat Fleet on the back with a "buy" rating. Fleet still has an extensive process of merger integration ahead, he said.
"Because of the high level of expense cuts, there could be a significant level of discontinuity" that could affect performance, he said. This issue not only afflicts Fleet, he said, but beguiles all the large acquirers, none of which have a "buy" rating from Mr. Dickson.
But Gerard Cassidy of Hancock Institutional Equities Services noted that Fleet has a solid record of successfully integrating its acquisitions.
Like Mr. Bicher, he predicted Fleet shares should reach the $42 to $43 range in the next 12 months. And Fleet could reach $5.75 earnings per share by 1997, a 26% increase from 1996 estimates, Mr. Cassidy predicted.
Fleet also trades at discount to its peers, Mr. Bicher said. The shares are valued at 7.8 times 1995 earnings, he said, 18% below the group average. But Fleet's dividend yield is 22% greater than the group average of 3.7%, he said.
Next year Fleet should trade at a price earnings ratio of 9.5, still 10% less than the group average, he predicted.
In other news, analyst Thomas K. Brown of Donaldson, Lufkin & Jenrette Securities Corp. initiated coverage of Roosevelt Financial Group with an "outperform" rating.
In glowing terms, Mr. Brown heaped praise on Roosevelt's management team for turning the thrift institution around and running such a tight ship.
The $9.1 billion asset Roosevelt, headquartered in Chesterfield, Mo., has a 41% efficiency ratio, far below its peers. And between 1991 and 1994, Roosevelt's earnings per share grew 273%.
While Roosevelt's stock should appreciate on its own accord, consolidation in Missouri will serve to bump up the price on speculation, he said. Roosevelt is a takeout prospect, he said, but should remain independent. Roosevelt finished up tktk at tktk.
Joseph Stieven of Stifel, Nicolaus & Co., in St. Louis said because Roosevelt is a thrift, Missouri's deposit cap does not apply. As a result, in-state banks like Boatmen's Bancshares and Mercantile Bancorp. could purchase the company.
Bank of New York Co. got a boost from George M. Salem of Gerard Klauer Mattison & Co. He strongly affirmed his "buy' rating on the stock, predicting it would improve 40% in the next year. Its shares finished up tkt at tkkt.