Future of Regional Banks Looks Tough, But Shares Sparkle on Takeover Hopes
John Kanas, one of the banking industry's most outspoken executives, has sounded the alarm that times are likely to stay tough for the nation's regional banks.
But while Mr. Kanas, chief executive of North Fork Bancorp, has found the answer to his problems in Capital One Financial Corp., many of his regional-banking brethren mightn't be so lucky.
Shares of North Fork jumped 15% to $29.20 yesterday in reaction to the New York bank's $14.6 billion planned takeover by Capital One. The move sent North Fork's stock price near its 52-week high of $29.98 in trading on the New York Stock Exchange.
As part of the deal, Capital One -- known lately for its "What's in your wallet?" ad campaign -- will for the first time plaster its name on retail banking branches in New York, New Jersey and Connecticut. It is the second large, recent acquisition for the big credit-card issuer, which late last year entered the traditional banking business by acquiring New Orleans-based Hibernia Corp.
"North Fork provides us with a proven franchise and a strong growth platform in the largest banking market in America," Richard Fairbank, Capital One's chief executive, said in a statement announcing the deal.
Despite Capital One's optimism, this year isn't expected to be a great one for the nation's financial institutions. Banks are raising interest rates to attract deposits and offering aggressive loan terms for consumers and corporate customers. Furthermore, credit quality is widely expected to soon start deteriorating from the unusually strong levels of late.
At the same time, profits are being squeezed by the narrowing gap between long- and short-term interest rates, known as the yield curve. Banks, which borrow at cheaper short-term rates and lend money at higher long-term rates, typically profit on the spread between the two. Indeed, Mr. Kanas, a 35-year veteran of the banking business, cited the flatter yield curve as one of the key reasons that North Fork decided to sell itself to Capital One.
All of these issues are hitting regional banks particularly hard. Unlike larger diversified banks such as Citigroup Inc. and J.P. Morgan Chase & Co., the regional players typically aren't in other businesses that generate sizable profits, such as providing merger advice.
"We don't see a compelling reason to get overly excited about regional banks right now," says Steve Scruggs, a portfolio manager at Bragg Financial Advisors Inc. in Charlotte, N.C., which owns stocks in large regional players like National City Corp. in Cleveland and Fifth Third Bancorp in Cincinnati.
Despite those views, regional banks are still valued highly in the stock market, in part due to speculation that big banks will swoop in to buy them. Shares of the 50 banks in the KBW Regional Bank Index have risen 23% since January 2004 compared with a 10% rise in KBW's large-bank index. As for this year, the regional banks are up 1.7% compared with a 2.2% rise among the large bank stocks.
"There is still some takeover premium built into these prices and the CEOs and shareholders still will want more than that" in any takeover, said Jacqueline Reeves, a regional-banking analyst at Ryan Beck & Co. Ms. Reeves has a "market perform" rating on North Fork. Ryan Beck, which makes a market in North Fork's shares, doesn't have a stake in the bank.
Like North Fork, some regional banks with strong positions in growing regions might still be attractive to prospective buyers. Among them: New Jersey-based Commerce Bancorp Inc., which is expanding in New York, Florida and Pennsylvania. Shares of Commerce were up 2.8% to $35.75 -- near a 52-week high of $35.98 -- in trading on the Big Board.
But even if the target is attractive, bank buyers may run into problems justifying such deals to their investors. Yesterday, shares of Capital One tumbled more than 7% to $83.10 on the NYSE. Analysts attributed the steep drop to Capital One's acknowledgment that the North Fork acquisition would dilute its earnings by 6.5% next year.
"Most banks would find that unacceptable. It's too high," said Gerard Cassidy, an analyst with RBC Capital Markets. Mr. Cassidy has a "sector perform" rating on North Fork's stock. He doesn't own any shares.
Instead of big deals, some investors and analysts think that regional banks are more likely to join forces in transactions that don't provide premiums to shareholders of either bank. Those deals, often touted as "mergers-of-equals," would allow the banks to temporarily lift profits by cutting jobs and assorted costs that are associated with combining two companies.
"We know the yield curve will steepen at some point, but for now, it's not a pretty picture," said Mr. Scruggs, the portfolio manager.
One big bank that is likely happy with the Capital One-North Fork deal is J.P. Morgan. In addition to advising Capital One on the deal, the big New York bank also is the largest shareholder of North Fork, owning 19.7 million shares, or 4.14% of North Fork's outstanding shares as of Dec. 31, 2005. A J.P. Morgan spokeswoman said the shares are owned by the bank's asset-management division on behalf of its investment clients.
地区银行形势依旧严峻
作为美国银行界最直言不讳的高管人士之一，纽约银行North Fork Bancorp的首席执行长约翰?卡纳斯(JOHN KANAS)警告称，美国地区银行的苦日子可能还会继续。
Capital One Financial Corp.已经帮助卡纳斯解决了难题，但其他的许多地区银行恐怕就不那么走运了。
信用卡发行公司Capital One计划以146亿美元收购North Fork的消息，让在纽约证交所交易的North Fork股价周一涨了15%，至29.20美元，接近52周高点29.98美元。
根据收购计划，Capital One的招牌将首次出现在North Fork位于纽约、新泽西州和康涅狄格州的零售银行门口。这是Capital One近来第二宗大收购，去年底该公司通过收购总部位于新奥尔良的Hibernia Corp.进入了传统的银行业务。
“North Fork为我们提供了一个经过考验的品牌和在美国最大的银行业务市场上的一个强劲增长平台，”Capital One的首席执行长理查德?费尔班克(Richard Fairbank)在宣布此项交易的声明中称。
虽然Capital One对这笔交易持乐观看法，但今年对于美国的金融机构来说估计不是一个好年景。许多银行都在调高利率以吸引存款，并向消费者和企业客户提供优惠的贷款条件。而且，普遍预计信贷质量不久将开始从近来非常好的水平下降。
与此同时，长、短期利差（即收益率曲线）的收窄也导致银行利润受到挤压。通常，银行都是以成本较低的短期利率借入资金，放出利率较高的长期贷款，从这两个利差中赚取利润。现年35岁、具有多年银行业从业经验的卡纳斯也将趋平的收益率曲线列为North Fork决定将自身出售给Capital One的原因之一。
所有这些因素都给地区银行带来了特别沉重的打击。和花旗集团(Citigroup Inc.)、摩根大通(J.P. Morgan Chase & Co.)等大型多元化银行相比，地区银行通常没有其他利润可观的业务，如提供并购咨询服务等。
“眼下我们看不出地区银行股票有什么令人非常高兴的地方，”北卡罗来纳州Bragg Financial Advisors Inc. 的投资组合经理斯蒂夫?斯克拉格斯(Steve Scruggs)表示。Bragg Financial现持有克利夫兰National City Corp.、辛辛那提Fifth Third Bancorp等大型地区银行的股票。
尽管有这些不那么乐观的看法，地区银行股票的估价仍然偏高，这在一定程度上是因为许多人猜测大银行可能会收购它们。由50只地区银行股票组成的KBW地区银行分类指数自2004年1月以来已涨了23%，同期KBW大型银行分类指数的涨幅为10%。而今年以来，KBW地区银行分类指数的涨幅为1.7%，KBW大型银行分类指数的涨幅为2.2%。
“这些股票的价格中依然存在收购溢价，许多首席执行长和股东依然希望能获得比现有股价还要高的收购价格，”Ryan Beck & Co.地区银行业分析师杰奎琳?瑞弗斯(Jacqueline Reeves)表示。瑞弗斯对North Fork的股票评级为与大盘一致。作为North Fork的造市商，Ryan Beck并不持有该股股票。
像North Fork一样，一些在高成长地区拥有强大实力的地区银行或许仍能吸引一些潜在买家。例如，总部位于新泽西州的Commerce Bancorp Inc.，该公司正在纽约、佛罗里达州和宾夕法尼亚州等地扩张。在纽约证交所交易的Commerce，股价涨了2.8%，至35.75美元，接近52周高点35.98美元。
但即使收购标的具有吸引力，买家在向投资者解释这宗收购时可能也会遇到麻烦。周一在纽约证交所，Capital One的股价跌幅超过7%，达到83.10美元。分析师们将该股的大幅下跌归因于Capital One承认，收购North Fork将造成公司明年收益减少6.5%。
“大多数银行都会认为损失程度难以接受，对收益的伤害太严重了，”RBC Capital Markets的分析师杰拉德?卡西迪(Gerard Cassidy)表示。卡西迪对North Fork的股票评级是与类股一致，他不持有该股。
一些投资者和分析师认为，相比大收购，地区银行之间更可能互相携手达成并购，这样一来，交易双方的股东就无须为此支付收购溢价。这些通常被称为同等对手间的并购交易，使得银行能通过裁员和创造协同效应暂时提高利润。
“我们知道将来某个时候收益率曲线将变陡，但目前，情况可不怎么好，”投资组合经理斯克拉格斯表示。
有一家大银行可能很高兴看到Capital One和North Fork的交易，它就是摩根大通。除了在这宗交易中为Capital One提供咨询服务，摩根大通也是North Fork的第一大股东，截至2005年12月31日，持股1,970万股，占North Fork已发行流通股的4.14%。摩根大通发言人表示，摩根大通资产管理部门是代表投资客户持有这些股份的。
