Florida Deal A No Go, but Investors Are Juiced

By Landy, Heather; Monks, Matthew | American Banker, December 16, 2010 | Go to article overview

Florida Deal A No Go, but Investors Are Juiced


Landy, Heather, Monks, Matthew, American Banker


Byline: Heather Landy and Matthew Monks

It almost made sense: a transaction between PNC Financial Services Group Inc. and Regions Financial Corp., involving branches in Florida.

Between the pressure on Regions to repair itself and the growing sense that Florida is once again fertile ground for banking, all it took was an unsourced report that PNC is interested in Regions - posted on a local newspaper blog and amplified by a pickup from national news outlets - to generate a quick spike in Regions' stock early Wednesday.

"That's why these rumors can get some traction and excitement - everybody is waiting for the next big, blockbuster deal that is going to happen," said Marty Mosby, an analyst with Guggenheim Partners LLC.

But shares of Regions retreated from a session high of $6.56 to a closing price of $6.31, up 1.8%, as the idea of a takeover by PNC got batted down.

A more plausible scenario might be the second component of the initial report by the South Florida Business Journal, that PNC also is weighing a deal with BankAtlantic Bancorp, which has been shopping its Tampa Bay-area branches for months. Analysts said PNC is one of a half-dozen or so banks motivated and able to acquire BankAtlantic's 19 branches there, and BankAtlantic shares remained elevated throughout the trading session, rising 11.63% to close at 96 cents. Regions declined to comment, and BankAtlantic officials did not return calls.

Right or wrong, the rumors spoke to investors, who are eager for straggling banks like Regions and BankAtlantic to get back on course. Regions has lost money in seven of the last eight quarters. BankAtlantic has not turned a profit since mid-2007, and is working on its third capital raise of the year to shore up a tangible common equity ratio that slipped below 2% in the past two quarters.

The market's reaction to the rumors also gave further validation to the notion that Florida is a logical place for a bank like PNC to expand. The Pittsburgh company already has 109 branches there, acquired in the takeover two years ago of National City Corp. And though the financial crisis decimated the Florida real estate market, taking down dozens of banks in the process, the resulting wellspring of relative residential real estate bargains makes it likely that Florida will keep attracting people from the Northeast and Midwest, along with their banks.

"When you look at the [failed Florida] banks that have been purchased from the [Federal Deposit Insurance Corp. …

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