Pace of Big Bank Mergers Expected to Slow in Face of Weak Stock Prices

By Cline, Kenneth | American Banker, February 28, 1994 | Go to article overview

Pace of Big Bank Mergers Expected to Slow in Face of Weak Stock Prices


Cline, Kenneth, American Banker


Was BankAmerica Corp.'s agreement to acquire Continental Bank Corp. a harbinger of more big deals to come?

Probably not, in the view of most analysts, who point to the current depressed level of bank stock, many of which are trading near their 52-week lows.

"It's kind of an affordability problem," said George Salem, with Prudential Securities Inc. in New York. "Prices of bank stocks are too low to make deals worthwhile."

But even if large buyouts are temporarily placed on hold, bank consolidation will continue in one form or another.

Burdened with excess capital, shrinking net interest margins, and a lack of top-line loan growth, many banks will have a tough time providing satisfactory returns to their shareholders by remaining independent.

'Another Flurry' Seen

For buyers, in-market deals provide the fastest way to cut costs and boost market share.

"We still have way too many banks chasing way too little business," said analyst Sandra J. Flannigan, with Merrill Lynch & Co.

"There are more acquisitions ahead. I can't tell you when, where, or at what price, but there will be another flurry."

Among the possibilities: more mergers of equals among super-regionals and continued acquisitions of smaller regionals in certain parts of the country. …

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Pace of Big Bank Mergers Expected to Slow in Face of Weak Stock Prices
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