
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, February 27, 1991                   TAG: 9102270100
SECTION: BUSINESS                    PAGE: A-9   EDITION: METRO 
SOURCE: MAG POFF BUSINESS WRITER
DATELINE:                                 LENGTH: Medium

REPORTS SAY VIRGINIA BANKS NOT YET OUT OF THE WOODS/ ANALYSTS STILL CAUTION

Declining interest rates may have raised investors' view of bank stocks, but two new analysts' reports have cautioned against buying shares in Virginia banking companies.

More "discouraging news" may be ahead for the state's banks, said Guy W. Ford, bank analyst for Scott & Stringfellow Investment Corp. in Norfolk.

Share values have risen in recent weeks, Ford said, because of the Federal Reserve Board action in lowering interest rates.

After falling by 14 percent to 68 percent during 1990, Ford said, it is natural that Virginia bank stocks bounced up during the recent stock market rally.

But, he said, bank problems may worsen in 1991 because they stem from the collapse of the commercial real estate market, and that market continues to deteriorate because "there is way too much supply" at a time when demand for commercial space is fading.

"The potential for more negative surprises still appears greater than the possibility that the worst is over," Ford said of the prospects for Virginia banks.

"My stance is to lighten up on the riskier bank stocks," he said. "Longer term, I think the better-quality ones will go higher and I just want to be focused on those."

Ford said he is focusing on First Virginia Banks Inc. because of its minimal exposure to commercial real estate credits.

Over the next two to four years, he said, successful banks will be those that succeed in driving down their cost of doing business and in developing more fee-based products and services. That strategy replaces the loan growth of the 1980s.

Wheat First Securities, meanwhile, lowered its earnings estimates for three Virginia banks, including Roanoke-based Dominion.

The Monthly Monitor report issued by the Richmond brokerage estimated Dominion will earn 75 cents a share this year compared to an earlier estimate of $1 a share because of a "weak loan portfolio."

Crestar's estimates dropped from $2.50 to $2.25 a share and Signet's from $1.85 to $1 a share because of a need to take high loan-loss provisions, the brokerage said.

by CNB