Stocks: Baltimore's Mercantile, Bank of New York Dip despite Buyback Plans
By KAREN TALLEY Shares of Bank of New York Co. and Baltimore-based Mercantile Bankshares dropped Tuesday despite announcements that the companies were buying back stock.
Bank of New York said it repurchase up to 18 million of its common shares during the next year. The announcement followed completion of a 30 million-share buyback that was announced in December 1997.
Shares of Bank of New York were off 81.25 cents, to $47.875
Mercantile Bankshares boosted its buyback program by three million shares, to 4.7 million. Shares fell 56.25 cents, to $36.4375.
The actions could signal a resurgence of buyback programs as banks look for ways to deploy excess capital, analysts said. Banks repurchase stock because it reduces the number of shares outstanding and generally raises per-share earnings.
Buybacks, which can also lift a stock's price, are considered a far less risky way of distributing excess capital than acquisitions, said Eric Rothmann, banking analyst at Stevens Inc., Little Rock.
Moving in the opposite direction, SunTrust Banks Inc. filed Tuesday to issue 2.7 million shares of common stock. The offering will raise $191.7 million through the placement of common stock with three institutional investors.
After the filing shares of SunTrust were down $1.9375, to $72.875. The filing priced shares at $71 each.
SunTrust is issuing the stock at below market rates in exchange for an expedited sale with what it eyes as long-term investors, analysts said.
The filing earmarked proceeds for "general corporate purposes," such as refinancing debt, making investments at the banking company level, or pursuing acquisitions.
A spokeswoman also said the transaction is related to some final corporate housekeeping on the eve of the company's planned merger with CoreStates Financial Corp. …