Magazine article American Banker

Multibanks' Performance Could Make It a Target

Magazine article American Banker

Multibanks' Performance Could Make It a Target

Article excerpt

With the New England economy showing signs of bottoming out, things are looking up for Multibank Financial Corp.

The $2.7 billion-asset company, based in Dedham, Mass., has been battered along with its regional competitors. But nonperforming assets appear to be leveling off, and some analysts think the company's shares are undervalued.

Gerard S. Cassidy, an analyst known for his bearish outlook on New England banks, raised earnings estimates for the company last week and shifted his rating to buy from sell.

And the company could be a prime takeover candidate when the region rebounds.

"With a statewide franchise, they would be tempting for someone looking to enter Massachusetts with a sizable presence," said John J. Rooney Jr., a banking analyst in New Haven for Legg Mason, Wood Walker.

Multibank is the parent of five Massachusetts banks and several nonbank financial services subsidiaries, including mortgage and leasing companies.

A recent rally on its improved outlook has pushed the shares of Multibank to about $7.50, 75 cents shy of the 52-week high that was reached last August. Last January, the shares had plummeted to $2.

Looking Ahead to Recovery

Mr. Cassidy, who operates out of Portland, Maine, for Boston's Tucker Anthony Inc., now thinks the area's depressed economy could start to recover next year. Improved earnings reports from regional banks in the third and fourth quarters of last year support that thesis.

That, plus signs of improved credit quality at Multibank, have brightened his outlook on the company.

Mr. Cassidy has devised his own measure of bank health, and by that measure Multbank is good shape.

His "Texas ratio," devised after he monitored hard-hit banks in that state, is defined as total nonperforming assets divided by tangible equity plus loan loss reserves. …

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