Magazine article American Banker

Wall Street Concocts Play on Regional Bank Stocks

Magazine article American Banker

Wall Street Concocts Play on Regional Bank Stocks

Article excerpt

Lehman Brothers Holdings Inc.. betting that investors expect regional bank stocks to appreciate in value. is issuing a hybrid equity-linked derivative whose payout is tied to an index of 20 regionals.

The new issue of "suns" -- Lehman's acronym for stock upside note securities is the investment firm's first linked to a bank stock index.

Investors in the securities can position themselves to profit from the consolidation in the industry, while avoiding the risk of losses in the event of a slide in bank stock prices.

"It's a good deal for a mutual, fund that wants to take a positionr in regional bank stocks without the downside of owning individual stocks," said Heinz Binggeli, managing director of Emcor, a New York risk management consultancy. "It's a convenient way to get a diversified position in bank stocks."

The 20 stocks in the index at one time or another mentioned as likely takeover targets.

According to the prospectus, the largest banks in the basket include: First Chicago Corp., with a market capitalization of $4.4 billion, Barnett Banks Inc. with $4.1 billion, CoreStates Financial Corp. with $3.6 billion, U.S. Bancorp with $2.4 billion, Bancorp Hawaii with $1.2 billion, Baybanks Inc. with $1.1 billion. Mercantile Bancorp. with $1.5 billion, and UJB Financial Corp. with $1.4 billion.

The basket also includes Michigan National Corp, which last week announced it would buy back $200 million of its stock, making it a more expensive takeover target. …

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