Equity fund manager praises ProvidentProvident Bankshares...

BANKING & FINANCE

June 03, 1993|By David Conn | David Conn,Staff Writer

Equity fund manager praises Provident

Provident Bankshares Corp. has a fan in Robert Bonelli, a former banker who runs the Ernst Bank Equity Fund L.P. in New York. The two-year-old limited partnership, which now has $6 million in assets (and posted a 40.3 percent gain last year, net of fees and expenses), is run by Mr. Bonelli's Ernst Financial Group, a division of the nearly 70-year-old Ernst & Co., a Wall Street market specialist and brokerage.

In town last week to visit several of the banks he follows, Mr. Bonelli had nothing but praise for Provident, which has about $2 billion in assets.

"In my opinion they're one of the most undervalued commercial bank stocks on the market," he said. His fund holds 20,000 shares and affiliated investors own at least four times as many.

Despite a 165 percent earnings increase in the first quarter, Provident's stock trades at a 20 percent discount to its book value of $19. It closed yesterday at $15, about where it was at the start of the year.

That's largely because investors still think of the company's main subsidiary, Provident Bank of Maryland, as a thrift, instead of the commercial bank it has become, Mr. Bonelli said.

He predicts the stock will sell above book by the end of 1993 and could fetch $32 in a takeover.

Best gives USF&G vote of confidence

When A. M. Best Co., the Oldwick, N.J., insurance rating agency, came out with its 1993 Best's Rating Monitor last week, the company gave USF&G Corp. a vote of confidence.

Best affirmed USF&G's rating of A, or "excellent" (the top rating being A++, or "superior"). USF&G got high marks for "improving its profitability, the reduced risk profile of the [company's] investment portfolio in recent years that has benefited its overall quality and liquidity, and the group's improved capitalization," according to Best Senior Vice President John H. Snyder.

A few points of caution: Results of USF&G's underwriting, while improving, remain below the industry average. And despite a low 49 percent debt-to-equity ratio, the company's 1992 earnings didn't cover debt-servicing.

But Best, Mr. Snyder, expects "improved property/casualty operating profits and diminished losses from non-insurance operations in the future, which should lessen the impact of this financial burden on the [company]."

Bank will bow out of Frederick market

Frederick may be a hot market in terms of income and population growth, but it's a tough place to make a living if your bank doesn't have much of a foothold.

That's the opinion of Baltimore Bancorp, at any rate. Last week it agreed to sell its two Frederick branches, with $25 million in deposits, to the tiny First Bank of Frederick (all employees will be invited to join First Bank).

A breakdown of market share by deposits in Frederick shows the smaller community banks dominate: FCNB Bank and Farmers & Mechanics National Bank each had just under 22 percent of deposits; and Fredericktown Bank & Trust Co. (an independently run unit of Mercantile Bankshares Corp.) was third with a 13.8 percent market share, according to figures supplied to Baltimore Bancorp by the Financial Institutions Data Exchange in Charlottesville, Va.

After that comes the First National Bank of Maryland, Maryland National Bank, and NationsBank/Maryland, with market shares ranging from 9.5 percent to 4.2 percent.

The Bank of Baltimore, Baltimore Bancorp's main subsidiary, had less than 2 percent, about the same as First Bank.

"We want to put our resources where we have our strengths," said Baltimore Bancorp Executive Vice President Larry D. Unger.

The company has no plans to buy or open any branches right now, he said. It's content to realize a double boost to its capital ratios from the sale: once from the money for the branches (probably less than $1 million at going rates), and once from the reduced asset base on which the capital-to-assets ratios are calculated.

Piven surfaces again,in suit against Spectrum

On May 20, the stock of Spectrum Information Technologies Inc. crashed from $11.75 to $6 on allegations that the company had overestimated the value of a licensing contract with AT&T.

The next crashing sound was the door of the federal courthouse in New York, where several investors filed class-action suits against Spectrum, which has patents for transmitting data over cellular networks.

One of the lawyers representing a potential class of stockholders was Charles J. Piven, a familiar name to Baltimore investors and companies alike. He has been involved in just about every major class-action securities suit against troubled Baltimore companies of late, including Baltimore Bancorp, USF&G Corp., Jiffy Lube International Inc. and MNC Financial Inc.

Brown, Quinlan take new positions

From the executive suite:

* Ellyn L. Brown, Maryland Securities Commissioner until last September, has been hired as the consumer advocate to the board of the National Association of Personal Financial Advisors in Buffalo Grove, Ill.

* Robert W. Quinlan, managing director for marketing at Provident Bank, has been elected chairman of the Mid-Atlantic Clearing House Association, a regional group that facilitates the electronic transfer of money between banking companies.

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