Magazine article American Banker

Merger Prospects Sparking Thrift Rally; UBS Upgrades Wash. Mutual, Standard Fed

Magazine article American Banker

Merger Prospects Sparking Thrift Rally; UBS Upgrades Wash. Mutual, Standard Fed

Article excerpt

Thrift stocks are booming on the prospect that mergers with banks will become more frequent in the aftermath of new federal legislation on savings and loan deposit insurance, analysts said.

The legislation, which reduced the premium for thrift deposit insurance to just 6.4 basis points per $100 of covered deposits, from 23 to 26 basis points, will make thrifts more "banklike," said industry observers. Banks' premiums have been at zero, giving them a big cost edge over thrifts.

In the latest sign of Wall Street's new enthusiasm, analyst E. Gareth Plank of the UBS Securities unit of Union Bank of Switzerland upgraded his investment ratings Thursday on Washington Mutual Inc., Seattle, and Standard Federal Savings, Troy, Mich. - to "buy" from "hold."

Washington Mutual shares were unchanged Thursday at $38.625, while thrift stocks continued to outpace the market. Standard Federal's shares declined 50 cents, to $46.75

Mr. Plank cited both fundamentally strong balance sheets and the thrifts' management teams, plus the likelihood that they are apt to attract merger suitors because of their already banklike cultures.

"Thrifts are getting to a very level playing field with banks," said analyst Thomas Theurkauf of Keefe, Bruyette & Woods Inc. "That will foster a lot of bank and thrift activity in the years to come."

Analyst Janet McCabe of Legg Mason Wood Walker Inc., who downgraded Standard Federal Wednesday to "hold" from "buy" because of its recent price appreciation, said she expects takeover activity as early as this year. …

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