Stock, rumors rise at 2 banks Takeover speculation has boosted shares of Mercantile, Provident

Economy also aids run-up

Banking

December 05, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

Shares of Mercantile Bankshares Corp. and Provident Bankshares Corp. -- Baltimore's two largest independently owned banks -- shot to highs yesterday, fueled in part by speculation that they could be taken over by larger banks, analysts said yesterday.

Shares of Mercantile hit a 52-week high of $38, up 12 percent in the past four days, while Provident's shares rose to a high of $61.06, up 3 percent.

The sudden run-up is driven by favorable economic conditions, and speculation that the two Baltimore companies could be acquired by out-of-state institutions, experts said.

"These things [abrupt stock rises] are just driven by general speculation," said David West, a bank analyst with Davenport & Co. in Richmond, Va. "Geography would suggest that they are possible takeover candidates."

While the pace of acquisitions has fallen off this year compared with 1995 and 1996, deals are big and prices are higher than they have ever been. This year, 272 banks have been acquired and a record $70.1 billion has been paid by buyers.

Several ofthese pricey transactions have occurred in the last several months in neighboring Virginia and Pennsylvania, where First Union Corp. and Wachovia Corp. have bought big regional banks.

Carl Stearn, chairman of Provident, which has $3.7 billion in assets, said the acquisitions have fueled the rumor mill, which in turn has propelled the company's stock higher.

"There are rumors all of the time," Stearn said. "It just matters who you talk to and when.

"Ourselves and Mercantile are considered to be small banks in the great world of Wall Street," he said. "We get lumped together in a group of banks that are all thought to be candidates for acquisition."

Stearn said the company wants to remain independent, but he acknowledges that he would have to take a good offer to shareholders for a vote. When asked if the company is in negotiations with another bank, Stearn said he could not comment because of company policy.

Hal Schroeder, a bank analyst with New York-based Keefe Bruyette & Woods Inc., thinks Provident is "in it for the long haul."

"I have no sense they are going anywhere," he said.

H. Furlong Baldwin, chairman and chief executive of the $7 billion-asset Mercantile, has been adamant about remaining independent.

"This current up tick, we have no more idea than you do about what has caused it," Baldwin said. "As far as the Mercantile is concerned, it is business as usual."

Janet McCabe, a banking analyst with Baltimore-based Legg Mason Inc., said Baldwin "has always said that he doesn't want to sell.

"But with the prices being paid for banks recently, his board of directors might find it more difficult to turn down an acquisition than they had in the past," she said.

McCabe said banks such as Winston-Salem, N.C.-based Wachovia, which recently bought Central Fidelity Banks Inc. in Richmond, and Pittsburgh-based PNC Bank Corp. are on the hunt and might look in Baltimore.

West said that as long as Baldwin has been chairman, "he has pursued and espoused an independent course.

"I have no reason not to believe him," West added. "You can never say never, but I think his intention is to pursue an independent course."

"There has been takeover speculation [about Mercantile and Provident] and it never happens," said Collyn Bement, a bank analyst with Ferris, Baker Watts Inc. in Baltimore. "I'm tired of everyone talking about takeovers."

Mercantile and Provident are not the only Baltimore-area banks whose stock prices have been soaring.

Shares of Westminster-based Mason-Dixon Bancshares Inc. and Olney-based Sandy Spring Bancorp reached 52-week highs Wednesday and remained there yesterday.

Mason-Dixon's shares were unchanged and closed at $30, and shares of Sandy Spring were unchanged and closed at $49.50.

Pub Date: 12/05/97

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