Magazine article American Banker

Stock of Takeover Targets Flat in Spite of Progress toward Interstate Banking

Magazine article American Banker

Stock of Takeover Targets Flat in Spite of Progress toward Interstate Banking

Article excerpt

Nationwide banking legislation is finally nearing reality, but investors are greeting the news with a yawn, for now. With few exceptions, the shares of probable takeover targets have not risen much this year.

For example, Barnett Banks Inc., Florida's largest bank, is widely viewed as an acquisition target, but its shares have gained only 1.2% this year. This gain comes up short of the 2.08% advance for the Dow Jones Industrial Average this year.

Crestar Financial Corp., Richmond, Va., also considered a likely takeover candidate under nationwide banking, is up only 0.6% this year.

Barnett stock was up 25 cents to $42.25 Monday, and Crestar stock was up 62.5 cents to $42.75.

Investors are apparently unmoved by recent progress in dismantling barriers to interstate banking. The Senate Banking Committee on Feb. 23 approved an interstate banking bill by a vote of 19-0. Also, the Virgina legislature has approved legislation letting that state opt out of the Southeast Compact after July 1, 1994. Similar bills are active in the legislatures of South Carolina, Georgia and Florida. Wall Street observers offer several reasons why these long-awaited events have not stirred greater interest in the market.

Cyclical Stocks

Bank stocks usually underperform the market when interest rates are on the rise. And, with the company expanding strongly, cyclical stocks typically find more favor with investors.

"You can get developments that seem very encouraging and yet bank stocks don't have any staying power in this market," said Richard Stillinger, associate research director at Keefe, Bruyette & Woods Inc.

Also, many states currently allow virtual nationwide banking, at least when other states reciprocate. "It amounts to closing the barn door a little late in some respects," said Judan S. Kraushaar, first vice president of Merrill Lynch & Co. …

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