Banks Forming Unions Receive Favorable Wall Street Attention

Strategic Insights -

Analysts have issued a new round of "buy" recommendations on banks that have formed unions, including North Carolina's First Union Corp. and Fulton Financial Corp. of Lancaster. This favorable attention comes after a meeting with top officials of First Union, where Chairman Ed Crutchfield announced a new strategy of limiting consolidation to mergers of equals. As a result, First Union's stock has risen, and analysts predict continued growth.

Key Takeaways:

  • First Union Corp.'s stock has risen $14.69 (31%) since the start of the month, with a price average of $54. First Union (NYSE: FTU) has been trading at a discount compared to its peers, with a price of $47.06 in April and $54.75 at the start of the month.
  • Chairman Ed Crutchfield stated that a no-premium merger-of-equals is the best way for First Union to build a nationwide business and compete with industry giants.
  • Analysts believe First Union won't be looking for another union soon, possibly not until after 1999, and it could take a couple of years to cultivate a willing partner.
  • Analysts predict First Union's valuation will continue to improve, and the bank will deliver top-tier growth in its earnings per share.
  • Sovereign Bancorp's announcement of investing $10 million in Mego Mortgage provided a new reason for analysts to recommend the Wyomissing-based bank to investors.
  • Sovereign Bancorp's stock price closed at $16.37-1/2 on Friday, up 6-1/4 cents from Thursday.
  • Analysts remain bullish on Fulton Financial Corp., which announced its plans to buy Ambassador Bank of the Commonwealth in January.
  • Fulton Financial Corp.'s stock price closed at $24.50 on Friday, down 25 cents from Thursday.

Statistics:

  • First Union Corp.'s stock price has averaged $54.1 since the start of the year.
  • First Union Corp.'s stock has risen 31% since the start of the month.
  • First Union Corp.'s stock price rose $1.44 on Tuesday, to $61 in midmorning trading.
  • Sovereign Bancorp's investment in Mego Mortgage is $10 million.
  • Sovereign Bancorp's stock price closed at $16.37-1/2 on Friday, up 6-1/4 cents from Thursday.
  • Fulton Financial Corp.'s stock price closed at $24.50 on Friday, down 25 cents from Thursday.

Sources:

  • The Morning Call: Susan Todd