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					                   AmSouth Bancorp
                         By Timothy Cullen




Portfolio Percentage: 5%
Current Price: $25.14
Target Price: $34.00
Stop Loss: $21.50
Beta: 0.413
P/E: 14.63
Dividend: $1.00
Market Cap.: 8.93B
52 Week Range: (21.91 - 27.00)
Company Profile

        AmSouth Bancorporation is a regional bank holding company headquartered in
Birmingham, Alabama, which operates approximately 680 offices and 1,200 ATM’s in
Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. In September of 2004
AmSouth had total assets of $47.5 billion and total deposits of $31.9 billion. AmSouth
operates in several key business segments including: consumer and commercial banking,
small business banking, mortgage lending, equipment leasing, annuity & mutual fund
sales, and trust & investment management services. Their largest section is consumer
and commercial banking. They are a small company with many vital locations across the
southeast. The company in March will release earnings from 2004 which are estimated
to be higher than 2003’s record year.

Performance

       Over the last 5 years in comparing it to HSBC and the S&P500 we see that ASO
has outperformed and continues to do so. This graph shows the percentage increase since
2000.




Recent News

      On January 13, 2004 AmSouth reported earnings were a record $626.1 million
compared with $609.1 million in 2002. That is a 2.79% increase from 2002.

        On December 17, 2004 two of AmSouth’s best executives were given more
responsibilities and were entrusted with company information. This inclusion is showing
that they can trust these two people more and will do a good job for the company. These
executives were taken from SouthTrust corp.
              On January 10, 2005, American Banker issued an article in its paper that
stated that AmSouth is a perfect company to acquire. I attended the NY Bankers
Association conference in Albany, NY and AmSouth was one of the companies used in
talks of M&A around big firms executives.

        On Jan 21, 2005, AmSouth announced that it was honored and is scheduled to
participate in Smith Barney Citigroup's 2005 Financial Services Conference in New York
on Jan. 26, 2005. This presentation gave AmSouth the chance to show off some of its
managerial muscle. According to several articles, AmSouth’s presentation was very well
done.


Industrial Analysis

       AmSouth’s sector is ‘Financial’ and its industry is ‘Regional Banks’.
Commercial and consumer banking in the U.S. is very saturated. This company trades on
the NYSE along with other banks of its size and stature. There are two things that
separates Amsouth from other companies. One is the placement of ATM’s across the
southeast. They have put in 400 ATM’s this past year and plan to expand into more
areas. And the second is that they are a perfect opportunity for a larger company to
acquire them and place their name on all branches and profits that are accumulated.


Porters 5
 Entry of New Competitors

        In Alabama there are many banks and holding companies that will try and take
your business but it seems that AmSouth is a leader. It is a near impossible industry to
get into unless you already have. If wanting to start a bank it is actually cheaper and
easier to buy out a bank and move it to the location you want. The reason for this is
because the amount of paperwork and initial fees that need to be paid are astronomical.

   Threat of Substitutes

        The banks that are in competition with AmSouth are Bank of America, HSBC
Holdings, Cardinal Financial as well as many others. Banking is a very saturated market
and had opened up these past couple of years with the access to Automatic Teller
Machines. ATM’s have become attached to the future of Banks in today’s society. It is
the closest ATM that wins. They make themselves available and give AmSouth account
holders a smaller or no charge for the use of any of their ATM’s. Also a large problem
for banks today lies within Credit Unions. We see that these bank look-alikes do not
have to pay taxes and can breeze by banks while we identical firms that are not credit
Unions having to pay taxes. By not having to pay taxes they can offer a lower interest
payment. This will entice the customer to work with them instead of working with a
bank.
   Bargaining Power of Customers

        The customers are the first people to be recognized as a banker. If you are
demanding they pay a higher interest rate than what they can get from Bank of America
you are going to possibly lose out on loan income. The same with ATM’s; If you are
going to put an ATM in a good location, you are hoping the customer use your machine
rather than the next one they see.

   Bargaining Power of Suppliers

       The suppliers are in control as well. The Fed can set an interest rates and
companies can demand more money for materials they provide. One such example is
NCR, Diebold, Fujitsu, and Triton are the four biggest ATM providers to Banks in the
United States. These companies can create a big and digitally defining ATM’s and
charge large amounts of money only to see the banks buy them. A cheap ATM is
$60,000. These companies can easily get the banks to buy them.

   The Rivalry of Competitors

       Bank of America is a large Corporation but hasn’t expanded its reach much to the
southeast. They do have funds exceeding many times AmSouth’s but it is noticeable that
AmSouth is a more consumer based firm. Cardinal like AmSouth is a smaller firm and
has chance for growth because of an increasing likelihood of ATM usage. Being such a
flooded market of banks and Credit unions, we see a fierce vigor to get the customer.

Growth Opportunities

        We can see in banking that there are also other ways of getting revenue besides
writing a loan to a person or getting ATM usage. AmSouth can start advertising across
the country for AmSouth credit cards or online loan applications. They can also require
that people that get loans at their bank must purchase insurance through them. There
aren’t a high amount of opportunities only expansions of already used ideas.

Risks

        The biggest risk for any bank is the Federal exchange regulations or the charter
regulations changing. The more often that examinations occur, the more money that the
company has to spend. This could put a dent in the revenues depending on how many
times and how deep they get examined. Another risk is that they will lose net income
because of the problematic market today.

Valuation

       Seeing how AmSouth pays a healthy dividend of a dollar I chose to use the
Dividend Discount Model so that I could show a price that I find would be more accurate.
Over the past five years the growth rate of their dividends has been 10.47%. I decided
that this number would be a good growth rate for my DuPont model. I decided that over
the next 4 years that this would be a good benchmark to use. I used a payout ratio of
55.72% and a P/E ratio of 14.81 both of which I researched on Brown Co. for. After
finding a terminal value discounted and found the present values of dividends to find an
intrinsic value of $35.74 per share.
         Looking at some of the Ratios we see that Beta for AmSouth is low at a 0.413 and
its P/E ratio at a steady 14.63. These are different than the comparisons of a 0.9 beta and
a P/E of 40.54. I believe that AmSouth’s P/E ratio tells us that it is possible that the
company is undervalued. Beta being at a 0.413 doesn’t necessarily mean that its low or
bad, it just means that its less volatile than the market is right now.


Recommendation

        Through my analysis and in my opinion, I believe that the fund should make an
investment in AmSouth Bancorporation. It is a medium cap well balanced company and
outperforms others in its category. I believe that the company has room to expand and
will gain greater market share. I believe that the stock can reach 35.74 and could do very
well for the fund.


Disclosure
       The views expressed in this report accurately reflect the personal views of the
author of this report. The author of this report received no investment banking-related
compensation or other supplemental payments in connection with the specific views
expressed herein.
                                    References:
1.) Yahoo! Finance
http://finance.yahoo.com

2.) Gale Databases
http://www.sbu.edu/go/library/online-databases/index.htm

3.) BrownCo
www.brownco.com

4.) Securities and Exchange Commission
www.sec.gov

				
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