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Is your online broker built to trade? Datek Online's advanced technology gives you fast executions, real time quotes and immediate portfolio updates. For a limited-time offer, go to http://www.datek.com/sivy/ Datek Online. Member NASD/SIPC. ***************************************************************** SIVY ON STOCKS from money.com December 6, 2000 Banks hitting bottom Earnings disappointments and fears about bad loans have triggered a new round of selloffs for financials like Bank of America and Chase Manhattan. But it looks as though the worst is over. By Michael Sivy Bank of America's announcement on Wednesday afternoon that fourth-quarter profits would fall substantially short of expectations sent major bank stocks into a tailspin. B of A [BAC] closed the day down nearly 8 percent, while Chase [CMB] dropped 3 percent. These declines are only the latest bad news for the commercial banking sector, which has been battered all year. In fact, both B of A and Chase are down by more than 20 percent since the start of the year. I can't say I anticipated the sell-off, since I bought Bank of America more than 15 percent above its current price. Nonetheless, there's nothing surprising about banks reporting bad numbers after a year of high interest rates and six months of slowing economic growth. Traders also got caught off guard by B of A's news. They were heavy buyers of bank stocks Tuesday after Alan Greenspan addressed a conference of bankers in New York City. The Federal Reserve chairman said "the pace of economic activity has moderated appreciably." He added that the Fed now has to be more attentive to the risk that the economy might slow too much. Many economists read into those comments that the Fed will formally change its stance in favor of lowering interest rates at its Dec. 19 meeting, and actually cut them early next year. Such news ought to be bullish for bank stocks. So why are they still falling? Basically, they've virtually acknowledged that they'll report sub-par earnings and higher loan losses this quarter and probably next. Share prices could dip a bit more as those weak results get reported. But most of that bad news is history -- from here on out, the trends will be getting better, not worse. Bank of America, which merged with NationsBank in 1998, is the largest U.S. bank. Its stock is currently down to a paltry $38, just $2 above the 52-week low. For 2001, B of A should report earnings of about $5 a share, just a single-digit gain from estimated 2000 results. Over the next five years, however, analysts think the bank could grow earnings by about 10 percent annually. Including the 5 percent-plus dividend yield, that's quite a generous return for shares that are trading at only eight times earnings. Chase Manhattan presents a similar case. The bank, which is acquiring J.P. Morgan, has been knocked down in anticipation of bad fourth-quarter results. Chase is a major lender to troubled Xerox, for example, so that could be a source of loan losses. Nonetheless, the banking giant offers 11 percent projected long-term earnings growth and a 3 percent dividend yield. With a P/E of just over 10 times next year's estimated earnings, Chase looks like a compelling buy as well. ======================= CHAT TRANSCRIPTS MONEY's Michael Sivy identifies sectors and stocks that possess true value in a rocky market. http://www.money.com/chat/2000/001204.html Tech Investor David Futrelle discusses the current state of the tech market and the outlook for various sectors. http://www.money.com/chat/2000/001201.html ======================= ### Post your comments on Michael's column at: http://www.money.com/depts/investing/sivy/index.html To subscribe or unsubscribe to Sivy on Stocks, go to: http://www.money.com/email/ Earning Releases and Calls For the latest corporate earnings releases and online conference calls click on: http://money.ccbn.com * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! 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