Magazine article American Banker

With a Deal in Limbo, California's Bay View Struggling on Wall St

Magazine article American Banker

With a Deal in Limbo, California's Bay View Struggling on Wall St

Article excerpt

Despite spectacular third-quarter earnings at California's Bay View Capital , its profit prospects are an enigma on Wall Street.

The $6 billion-asset San Mateo banking company reported last week that net income in the third quarter soared to $9 million, up 80% from the year earlier. Yet its stock price has plunged 38% since Aug. 1 -- bottoming out at $11.75 Tuesday. And analysts have reduced earnings estimates for next year by as much as 45 cents per share.

Of chief concern to analysts and investors is Bay View's much-delayed deal to buy Franchise Mortgage Acceptance Corp., a Los Angeles originator of loans to fast-food restaurants, gas stations, and convenience stores.

The $282 million deal, which Bay View had been counting on to boost net income in 2000, was originally scheduled to close in August. In a conference call with analysts last week, Bay View officials conceded that the sale may not even close by its latest deadline, Nov. 1, due to an undisclosed dispute with Fannie Mae.

"We suspect that the uncertainty surrounding the Franchise Mortgage deal and its impact on earnings may hurt Bay View's near-term performance," Thomas F. Theurkauf, a bank analyst at Keefe, Bruyette & Woods Inc. in New York, wrote in a research note.

"There are a lot of moving parts to Bay View's numbers that could have a material impact on its net income," said Erick J. Reim, a bank analyst at U.S. Bancorp Piper Jaffray in Minneapolis.

Bay View's president and chief executive officer, Edward H. …

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