Stocks: Latest Mergers Inspire Fund Managers to Add To Holdings of

The recent spate of acquisitions has encouraged some portfolio managers to add to their holdings of banks and other financial companies.

NationsBank Corp.'s completion of its buyout of Boatmen's Bancshares, Banc One Corp.'s deal to acquire First USA Inc., and the sale agreement between Dauphin Deposit Corp. and Allied Irish Banks PLC have all drawn new attention to the sector.

The deals have lent credence to the idea that bank earnings could continue to grow regardless of interest rates and other cyclical factors.

"Banks are able to leverage their franchise value better than in the past," said Charles Lemonides, managing director of Sterling Advisors, the money management arm of Gruntal & Co. "This will contribute to solid earnings that should continue."

The interest among fund managers could fuel a continued climb by bank and financial stocks, many of which are already trading at higher-than- normal multiples of earnings.

Mr. Lemonides recently bought a position in NationsBank, reasoning that "the bank is going to be able to derive great earnings from the merger with Boatmen's. It will offer fantastic cost-cutting opportunities.

"NationsBank has always been very aggressive, but the way that they've handled themselves in the market has changed. They clearly see themselves as a money-center bank across all aspects of the business."

Mike Stead, chief investment officer of SIFE Trust Fund, Walnut Creek, Calif., has recently added brokerages to his stash of stocks because of their improved performance and presumed value as buyout targets.

"I really like the increased revenues and earnings per share that we're seeing in brokerages," Mr. Stead said, adding that they are attractive targets for foreign and domestic banks now that their capital levels have reached all-time highs.

Analyst Gerard Cassidy of Tucker Anthony Inc. also is banking on the possibility that consolidation, especially of thrifts, will go forward at an accelerated rate in 1997.

"Now that section 20 rules have changed, the large regional banks will expand their presence in the mutual brokerage area," Mr. Cassidy said. "Investors can find a bucket of regional broker-dealers and do quite well."

Mr. Cassidy named Piper Jaffray Co., Alex. Brown & Sons Inc., J.C. Bradford & Co., and Morgan Keegan & Co. as regional brokerages whose investment banking capabilities and retail consumer bases would be appealing to large regional banks.

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