Magazine article American Banker

Bank Stock Issues Become a Tougher Sell

Magazine article American Banker

Bank Stock Issues Become a Tougher Sell

Article excerpt

Bank Stock Issues Become a Tougher Sell

Seven banks have sold common or preferred stock since the beginning of October, but it looks as if the window for capital raising is about to close, as big institutional investors turn bearish.

For most of 1991, investors demonstrated a renewed confidence in the banking industry by buying bank debt with low interest rates and oversubscribing to new stock issues. But the climate is changing. To issue preferred stock today, banks must pay higher dividends or settle for less cash than planned.

"The sentiment on bank stocks is bearish and that affects the demand for new issues," said Harry Rosenbluth, senior vice president at Boston Co., one of the biggest institutional investors in bank stocks. "Right now, there is not much demand for them."

Better Rates Demanded

Until the economy is righted and banks turn the corner on asset problems, stock issues will probably remain tough to sell.

"Investors are demanding better rates to take the paper," said Mr. Rosenbluth.

Banks have sensed the cooling of investor interest.

"There has been a dwindling appetite for retail preferred stock," said Richard R. Pannone, treasurer at Fleet/Norstar Financial Group.

Fleet tried to raise $125 million through a preferred stock offering in November. Unfortunately, the day the issue was sold was the day the stock market fell 120 points. The banking company ended up raising $100 million, $25 million less than planned.

Fleet's is not the only hardluck story. …

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