Magazine article American Banker

Fleet's Merger Strategy Wins Upgrade from Morgan Stanley

Magazine article American Banker

Fleet's Merger Strategy Wins Upgrade from Morgan Stanley

Article excerpt

Morgan Stanley & Co. upgraded Fleet Financial Group on Tuesday, citing the purchase of Shawmut National Corp. and the deal to buy National Westminster Corp.

Analyst Dennis F. Shea upgraded the Providence, R.I., bank to "outperform" from "neutral."

"The stock was too inexpensive to ignore," he said.

Shares closed at $41, up 75 cents on a day when the S&P bank index rose 0.23% and the S&P 500 gained 0.45%.

Mr. Shea said that if shares were to weaken to $36, Morgan Stanley would upgrade them to a "strong buy."

The Shawmut acquisition, completed last November, is expected to bring an annual cost savings close to $400,000. The coming Natwest acquisition could bring $200 million more of projected cost savings, Mr. Shea said.

The analyst said Fleet's earnings per share will increase to $5.20 in 1997. He maintained his $4 estimate for this year.

In addition to boosting the stock, the upgrade seemed to offset two other events that could have caused Fleet shares to slide.

The U.S. Labor Department has filed a complaint against Fleet for an alleged wrongful firing; and the bank issued $175 million of perpetual cumulative preferred shares priced at $50 a share.

The preferred shares - which can weigh down the balance sheet and cause the bank's stock price to slip - were issued to fund the acquisition of Natwest, said Mr. Shea.

The Labor Department complaint "is a hangover from a problem before," he said, adding: "It will not be material to the stock going forward. …

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