Magazine article American Banker

Branchless Bank Sells $60M of Stock

Magazine article American Banker

Branchless Bank Sells $60M of Stock

Article excerpt

Telebanc Financial Corp., a pioneer of telephone-based banking, raised $60 million in a 4.5 million-share offering July 23.

The share price closed at $22.375 that first day, $8 above the offering price set by underwriters BancAmerica Robertson Stephens, CIBC Oppenheimer, and Legg Mason Wood Walker Inc.

Last Friday it ended at $20.75.

Proceeds of the secondary offering, which raised the shares outstanding to 11.4 million and put the Arlington, Va., banking company on the national Nasdaq market for the first time, will be used for a national marketing campaign.

"We determined this was the year we were going to spend money on brand- building and solidifying our first-mover image," said Aileen Lopez Pugh, chief financial officer of Telebanc.

The $1 billion-asset bank's 1998 marketing budget of $3.5 million could rise as high as $6 million next year, said Pawan Malhotra, an analyst at Legg Mason.

The Telebanc offering and recent good press for other virtual or branchless ventures, such as Net.Bank Inc. and Security First Network Bank, indicate that the "market for on-line banking and highly secure forms of electronic commerce is starting to come through," said Gary Craft, analyst at BancAmerica Robertson Stephens.

Telebanc's first-quarter revenues grew 41%, to $18.1 million. Because of an increase in marketing expenses, net income decreased 50%, to $436,000.

Given its reliance on the telephone, Telebanc has a head start over ventures that began life on the Internet. Net.Bank's interest income in the second quarter was $4. …

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