BankAmerica Added to Salomon’s Buy List

BankAmerica executives have been contending for several months that the worst of their problems are behind them. Tuesday that view got some support.

Salomon Bros., a top New York investment house, added the San Francisco-based banking company to its list of 45 recommended stocks for investors and predicted that BankAmerica will post favorable earnings over the next several quarters and show a profit for 1988.

BankAmerica, the nation’s third-largest bank company and California’s largest, replaced Bankers Trust of New York as one of two banking companies on Salomon’s pick list. The other is J. P. Morgan.

“Credit quality at BankAmerica continues to improve, and management is keeping a tight rein on costs,” said Robert S. Salomon Jr., a managing director of the firm.

He predicted that the company would earn $2.25 a share in 1988, in contrast with a loss of 56 cents a share last year. He said his firm’s projected $3.50-a-share profit for BankAmerica in 1989 may be conservative.

Despite posting its third consecutive annual loss in 1987, BankAmerica and its chief operating unit, Bank of America, showed some signs of progress in the last half of the year. The company posted slight profits in the third and fourth quarters based largely on cost cutting and improvements in loan quality.

Efforts to improve those critical areas are continuing, but most analysts believe that the bank has a long way to go before it is restored to solid profitability.

The stock market did not appear to react to Salomon’s upgrading, and BankAmerica stock closed unchanged at $10.50 a share. The stock has been as high as $13.87 and as low as $6.63 during the past 52 weeks.

The Salomon recommendation carries some additional weight because the investment firm’s senior banking analyst, Thomas H. Hanley, is widely regarded as one of the industry’s top experts.