Big Banks

Chase Manhattan Corp.

Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %> has played second fiddle to Citicorp in the minds of investors and thus carries a lower P/E than its Park Avenue counterpart. The company's healthy growth in international commercial and industrial lending in the last year has balanced its position as the third-largest originator of mortgages in the U.S. and as one of the top four issuers of credit cards.

Judging by the company's P/E ratio and price/assets ratio, investors aren't giving credit to Chase for the theory that number two tries harder or for its standing of having the highest noninterest income to net interest income in the traditional banking group, which is an attractive and telling feature of Chase's business. On these bases, Chase is undervalued relative to Citicorp. Based on price-to-tangible book value, though, there is little difference between it and Citicorp.

Citicorp is simply a more productive company, though, as are most of the rest of the group. Slower growth and lesser profitability may make Chase's value profile somewhat deceiving, but there's more room here for improvement than almost any other company in the group.

The Financials

Through six months of the year, assets grew 4.8%. Trading revenue carried the day for Chase, growing over 10% while "other revenue" (the word "other" on financial statements is a bane to the analyst) grew 336%, to $310 million. Non-interest expense was kept under control, gaining less than 4% over last year. Operating EPS (before counting a large restructuring charge) grew 5.4% over the prior year.

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