Bank of Boston Corp. shares skidded in value again Monday on investor fears that the difficulties of emerging markets are spreading to Argentina, where the company has a major presence.
The stock fell to $27.625, off 50 cents, on Monday after trading as low as $26.875. That followed a dive of $1.875 on Friday.
Shares of Citicorp, which also has extensive operations in the Latin American nation, also fell again Monday. The New York bank's stock was down 25 cents, to $42.125, after a slide of $1.875 on Friday.
Such large declines starkly illustrate investor jitteriness about bank exposure in such countries after the currency crisis in Mexico. The slumping of the dollar and the bond market have reinforced the anxiety.
But weakness in Bank of Boston shares, after being intensified Friday by a downgrade from Smith Barney Inc., prompted another firm to upgrade its investment opinion of the bank on Monday.
"The reaction in this stock has been an emotional one that is not really based on the fundamentals," said Stephen Berman of Natwest Securities Corp., who raised his rating to "hold" from "underperform" previously.
"After checking, I don't think Argentina is going to present earnings problems for the company. They should have a very strong first quarter there," said the analyst.
Bank of Boston owns a major local bank in Argentina. It contributed about 9% to the parent company's earnings last year, Mr. Berman said.
The Smith Barney downgrade Friday, to "outperform" from "buy" was the result of the New York securities firm cutting all Argentina-related recommendations.
Smith Barney analyst Henry C. Dickson said he felt the move was "prudent and appropriate," but added that Bank of Boston had done "a good job in Argentina."
The Argentine bank has a $2.2 billion loan portfolio, with about $1.2 billion of that exposure to multinational companies, $500 million to middle-market borrowers and the rest to consumers and other banks.
Over the past week, worries have grown about the footings of Argentina's economy as bond prices have plunged and interest rates soared. Stock prices have also plummeted.
Investors are apprehensive that the nation's economy will sour and prevent it from fully servicing its debt. A currency devaluation, which sparked the Mexican crisis, is also feared.
Last Friday, the International Monetary Fund said was discussing with Argentine officials the possible extension of a credit facility set to expire at the end of the month
At press time, Bank of Boston had not responded to a request for comment on its exposure.
Mr. Berman said Monday he had not gone beyond a "hold" rating for the Bank of Boston stock because of the "crisis psychology right now about Argentina and the dollar."
"I would not be surprised to see further weakness," he said, "but I but would be aggressive on any weakness. I see the stock getting back to low 30s this year, to $31 or $32."
The analyst said he acted because the bank is also doing well domestically, enjoying a positive advantage from rising rates, because it has positioned itself as asset sensitive.
"The (net interest) margin was strong last year and I continue to believe the margin will hang in there," he said. "There is even some advantage from Latin America on this," he said, referring to rising rates there, but New England is also a factor.
Deposit rates in New England have lagged and seem likely to continue to lag, he said, enabling the bank to manage itself well in a rising rate environment.
Mr. Berman said he approved of the bank's strategy of trying to diversify away from its traditional wholesale banking focus and become more of a retail bank.
Bank of Boston has national wholesale banking operation that produces about 50% of its earnings.
Mr. Berman said he felt comfortable the diversification into more consumer banking would be accomplished through small-scale acquisitions.
"I don't get the sense they are going to go out and try to match the Fleet Financial acquisition of Shawmut (National Corp.) with a large-scale deal of some kind," he said.
Mr. Berman said he is expecting modest earnings growth this year of about 6%, with 1995 earnings of $4 per share, up from $3.76 last year. His 1996 estimate is for $4.25, but the analyst emphasized that this is deliberately conservative "because we aren't that far into 1995 yet"
At a price on Monday of $27, Mr. Berman noted that Bank of Boston shares are trading at an inexpensive 6.8 times his 1995 estimated earnings. In fact, he noted, they are trading not far above their book value of $25 per share.
