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14809.BDT analyst at Detroit-based Roney & Co. is recommending that investors sell Michigan National Corp. stock, but other analysts around the country are taking a wait-and-see attitude.
Roney analyst Stephen Puhr said investors should sell shares of the bank-holding company because its weak 1989 earnings show little prospect of a turnaround over the next few quarters. Puhr also feels that its loan portfolio is too heavily weighted to real-estate loans.
But Michigan National Chairman Robert Mylod said, "Back in early 1989, we began to feel uncomfortable about the way the economy was headed. We put our efforts to strengthening the balance sheet. We were not concerned about earnings."
Although many of the company's loans are backed by real estate, Mylod said, "It would be misleading in the extreme to say that a bank is in trouble because its loans are based too heavily on real estate."
At the end of 1989, construction loans and real-estate mortgages represented $674 million out of total mortgage loans of $2.4 billion and total loans of $6.1 billion, Mylod said. Commercial loans totaled $3.2 billion (some are secured by mortgages but were loans for operating funds, he pointed out), and installment loans totaled about $500 million.
Mylod cited a recent report published by national investment firm Shearson Lehman Hutton Inc. Analyst Charles Cranmer, who wrote the report, said regional bank stocks will present an extraordinary investment opportunity in mid-1990.
But Cranmer cautioned investors to concentrate on high-quality bank stocks, which he said are less likely to produce negative credit quality surprises and should be well positioned to expand market share as their weaker competitors retrench. He placed Michigan National in the medium risk category and noted that the company notably increased its real-estate construction portfolio in 1989.
Most analysts believe the bank-holding company is in good shape. But Michigan National's asset mix concerns some of them.
"Loans to real-estate developers and commercial mortgages are a worrisome trend everywhere . . . To be sure, the Midwest has been one of the best-performing regions," said...