Inc. on Monday downgraded Bank One Corp., Mellon Bank Corp., and PNC Bank Corp. Bank shares as a group will outperform the market, but "more focus will be crucial" to select the stocks that will lead the pack, said Ruchi Madan, lead banking analyst at PaineWebber. Federal Reserve rate cuts, relatively low price-to-earnings ratios, and continued strong earnings make a strong case for the bank group, Ms. Madan said. But she reduced her rating on Bank One to "attractive" from "buy," saying there is little potential for further price gains after a recent run-up. The stock slid $2.125, to $51.8125, on Monday. She cut her ratings on Mellon and PNC to "neutral" from "attractive," saying the stocks, while still positioned for gains, will not increase enough to outperform the market. Her "neutral" rating means she predicts less than a 15% price increase in coming weeks. Mellon lost $1.375, to $61.5625, and PNC was off $1.9375, to $50.1875. Ms. Madan said the new BankAmerica Corp. is her favorite stock. Its shares "have been excessively punished" because of the company's money- center-like activities and disappointing third-quarter earnings, she said. The stock fell $2.3125, to $60.125. Ms. Madan also reiterated her "buy" recommendation on Wells Fargo & Co., saying the company may delay some of the cost savings from its merger with Norwest but will temper this with higher earnings from its securities portfolio, a lower tax rate, and mortgage revenues. Wells shares ended the day at $39.0625, off 93.75 cents. James Schutz of ABN Amro who also rates Wells a "buy," called the San Francisco company "one of the best-managed financial institutions in the country, with a well-diversified portfolio of bank and bank-related businesses." Mr. Schutz on Monday also reiterated his "buy" ranking for Mellon, saying the banking company could experience above-average growth over the next three to five years. Mellon benefits from its "unique position in the mutual funds area, a large investment management business, and fast-growing institutional trust operation," Mr. Schutz said. The ratings actions came as bank stocks were giving back some of their gains from last week. BankBoston Corp. dropped back 3.25% after last week's 20% increase. Bank One lost 3.94%, after a 10.6% rise. And after gaining 9% each last week, BankAmerica Corp. shed 3.70% and Fifth Third Bancorp 3.82%. The Standard & Poor's bank index fell 2.79% and the Dow Jones industrial average 0.86%. The S&P 500 fell 0.95% and the Nasdaq bank index 1.03%. In other market action, shares of J.P. Morgan slid $4, to $99.75, after word that the banking company would use cuts and attrition to cut almost 5% of its staff, or 740 employees by yearend. (See story on page 1).

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