Magazine article American Banker

Upbeat Commerce Report Fails to Convert Skeptics

Magazine article American Banker

Upbeat Commerce Report Fails to Convert Skeptics

Article excerpt

Shares of Commerce Bancorp Inc. have improved their performance this year, and on Wednesday they got another boost when the Cherry Hill, N.J., company reported good fundamentals for the first two months of the year.

However, while most analysts remain bullish on Commerce, some continue to be leery of its prospects.

Mark Fitzgibbon, a co-director of Sandler O'Neill & Partners LP, is one of the bulls and rates the stock a "buy." In a research note Thursday, he wrote that the quarterly update on earnings and other issues was "overwhelmingly positive."

And even the analysts who give the company a lukewarm or a "sell" rating said they considered the update good news. Several analysts have increased their 12-month price target for the stock.

But some observers, among them Adam Barkstrom of Legg Mason Wood Walker Inc., continue to question the company's reliance on deposit growth.

In a filing with the Securities and Exchange Commission, Commerce said it expects to meet or exceed analysts' earnings expectations for the first quarter and this year, and that deposit growth remains robust..

Mr. Barkstrom has been a skeptic for some time, and on Monday, prior to the filing, he wrote in a research note that the company's deposit growth has actually slowed since the second quarter of last year. That fact, he wrote, "points to an inevitable slowing in deposit growth going forward."

Recent data by the Federal Deposit Insurance Corp. indicated that deposit inflows at most banks slowed toward the end of the year, and some analysts have said repeatedly that this will hurt Commerce, which depends heavily on low-cost "core" deposits. …

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