NationsBank may be eyeing Fleet Financial Speculation flies on Wall Street

September 22, 1993|By Knight-Ridder News Service

CHARLOTTE, N.C. -- While the takeover fight for Paramount Communications Inc. had much of Wall Street in a frenzy, some investors speculated yesterday that NationsBank Corp. was back on the prowl.

Yesterday, there were reports that the Charlotte-based bank company was thinking about making a bid for Providence, R.I.-based Fleet Financial Group, New England's biggest bank.

The story was given a boost when stock-market commentator Dan Dorfman mentioned the possible combination on television yesterday morning, citing some remarks by First Boston Corp. bank analyst Thomas Hanley on Fleet.

Mr. Hanley did not return several telephone calls, and both banks declined comment on the reports.

However, the shares of the two stocks did react in predictable fashion. Typically, the acquiring firm's shares fall while the target's shares jump.

Fleet was the ninth-most active issue on the New York Stock Exchange on volume of 2.4 million shares, up $1.375, to $33.875. Its average daily volume is 484,620 shares.

NationsBank shares fell 87.5 cents, to close at $48.875. The reports were greeted with skepticism, but also acknowledgment that NationsBank has a well-deserved reputation for figuring out innovative ways of buying other banks.

"Anything is possible, I guess," said Frank Anderson, a bank analyst with Stephens Inc., in Little Rock, Ark.

NationsBank's biggest obstacle is the Southeast regional banking compact. This is a legal barrier erected by a dozen Southern states in the 1980s to protect the region's banks from the possibility of being gobbled up by then-bigger Northern banks. The key to the compact is the requirement that banks have 80 percent of their deposits in the South if they want to expand into other states belonging to the compact.

Today, several Southern banks have grown large enough to compete with the nation's biggest banks. NationsBank is the country's fifth-biggest bank, with $123 billion in assets.

Yet, the barrier that once kept other banks out now keeps Southern banks in.

North Carolina earlier this year passed a law that would have the effect of pulling the state out of the compact -- but not until mid-1996.NationsBank now has $80 billion in deposits. On Oct. 1, it will complete its purchase of Maryland's biggest bank -- MNC Financial Inc. -- with about $13 billion in deposits.

Fleet, with $45 billion in assets, has $32 billion in deposits. That puts it out of NationsBank's reach. The biggest bank NationsBank could buy outside the region and stay in compliance with the compact would have about $19 billion in deposits.

"Legally, they can't do anything," said Mark Alpert, a bank analyst with Alex. Brown & Sons Inc.'s New York office. "I suppose they could do some kind of a stakeout, but I think it's a stretch." A stakeout is an agreement to merge at some point in the future. Other skeptics said that Fleet doesn't fit in with other NationsBank purchases.

NationsBank's three biggest deals -- MNC, C&S/Sovran Corp. and First RepublicBank Corp. -- have all involved wounded or failed banks.

"If I was a betting man I would give sizable odds against it," said Jon Burke, a bank analyst with Robinson-Humphrey Co., in Atlanta.

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