Stocks of local and regional banks were hopping yesterday on takeover speculation after the announcement that Chemical Banking Corp. and Chase Manhattan Corp. are merging to create the nation's biggest bank.
Crestar Financial Corp.'s stock hit a record $55 a share, up $1.12; Mercantile Bankshares Corp. closed at $25.375, up 25 cents; Signet Banking Corp. closed up 75 cents at $25.75; and Columbia Bancorp's stock reached $15, up 50 cents.
"Almost everybody across the board has been up," said David M. West, a banking analyst with Richmond, Va.-based Davenport & Co. "It is the kind of merger frenzy you get; it is always a guessing game as who mergers with who."
But analysts believe bank stocks are bound to cool off in the months ahead as investors realize they are peaking and as it becomes clearer that companies will have a tougher time making big profits.
"The stocks are already at pretty high levels," said Janet McCabe, of Legg Mason Wood Walker Inc. in Baltimore. "I'm not sure how much higher they can go before some sense comes into the market."
"The bank stock market is a little frothy," added Mr. West. "I think it is driven by speculation about merger combinations."
There is plenty of reason to speculate, too, since there has been a blast of merger activity this summer. On Friday, St. Louis-based Boatmen's Bancshares Inc. agreed to buy Fourth Financial Corp. of Wichita, Kans., for $1.2 billion. Yesterday, amid the Chase-Chemical uproar, Cleveland-based National City Corp. said it would acquire Integra Financial Corp. of Pittsburgh in a deal valued at $2.1 billion, First Nationwide gobbled up SFFed for $250 million, and Fifth Third Bancorp. of Ohio and Kentucky Enterprise Bancorp. also agreed to merge.
Those deals follow First Union Corp.'s June $5.4 billion merger deal with First Fidelity Bancorp, and First Chicago Corp. and NBD Bancorp's $5.3 billion deal in July.
"The pace is really astonishing," Ms. McCabe said.
The Chemical and Chase merger would create a $297 billion-asset banking company with 75,000 employees and offices in 39 states and states. The merger dwarfs any recent mergers, and the new bank would surpass reigning heavyweight Citicorp, which has $257 billion in assets.
The merger will have little impact on Maryland consumers because Chase agreed to sell its branch network in the state to Crestar in June, analysts said.
Who's next is anyone's guess. Locally, some industry observes believe Provident Bankshares Corp. is likely to do a deal. But its stock remained unchanged at $28.87 a share. Meanwhile, the market seems to point to Richmond-based Crestar, which has seen a nearly 20 percent rise in its stock since the end of May.
But Ms. McCabe believes Signet will be acquired within the next 18 months and Crestar could be taken over within the next three years.
"It is possible that any one of the number of companies could be bought," she said. "Signet in Virginia is a very probable candidate. Crestar's chairman [Richard G. Tilghman] is not yet ready to sell, I don't believe, but three years from now I think he will be. Among the locals, it is just a crap shoot."
