Magazine article American Banker

Interstate Plans Spark Gains, Fears

Magazine article American Banker

Interstate Plans Spark Gains, Fears

Article excerpt

The interstate aspirations of several banking companies lat week produced great expectations in some investors and fulsome trepidation in others.

The stock prices of the District of Columbia's two largest banking companies surged on the prospect of the district opening up soon to expansion by money center banks. But the price of Shawmut Corp. shares dropped on market fears that if the Boston corporation goes through with its offer for Society for Savings in Hartford, Conn., it will dilute earnings and thus the value of Shawmut shars.

The Capitol City runup was sparked when the Council of the District of Columbia, the district's governing body, last Tuesday gave preliminary approval to a bill that would permit expansion into the district by bank holding companies from anywhere in the nation. A final council vote on the legislation is expected on Jan. 28.

The city's two largest bank holding companies, the $4.9 billion-asset Riggs National Corp. and the $3.8 billion-asset American Security Corp., would be the principal beneficiaries of the bill. Neither company was considered an attractive takeover candidate for bank holding companies from their region. A nationwide law, however, would enhance the attraction of both.

While investors in Washington-based banks sat in eager anticipation, investors in the $7.8 billion-asset Shawmut Corp. broke out in a cold sweat.

In addition to earnings dilution fears, investors were troubled by the prospect that Shawmut would increase its all-stock offer for the $2. …

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