Was it a masterful hoax, as one banking analyst put it, or is Chicago’s largest bank about to be taken over or merge with another?
Officials of First Chicago NBD Corp. have declined to comment on rumors that swirled through Wall Street on Tuesday and Wednesday and sent the banking firm’s stock on a roller coaster.
On Tuesday, the stock soared $5.12, or nearly 7 percent, to $79.06, on rumors that it was about to be acquired by Banc One Corp. of Columbus, Ohio.
Shares jumped again Wednesday to an all-time high of $84.44, before falling back to finish at $78.12, off 94 cents for the day.
“Once these things get going and are reported on CNBC all day, they take on a life of their own and the stock gets hot,” said James McDermott, president of Keefe, Bruyette & Woods, a New York firm that specializes in bank analysis. “It looks like this one has come and gone again.”
Dow Jones News Service reported Wednesday that Banc One has no plans to launch an unsolicited takeover bid, a tactic it has never used, according to a person close to the banking company.
Some observers speculated that if there is any substance to the rumors, an announcement might come shortly after this weekend.
First Chicago NBD Chairman Verne Istock could not be reached for comment because he is traveling in Asia, a spokesman said. The firm’s next scheduled board of directors meeting is Dec. 12.
First Chicago NBD, the nation’s ninth-largest banking firm, has been the subject of merger speculation since it was created by the merger of First Chicago Corp. and Detroit-based NBD Bancorp Inc. two years ago.
The usual suspects include Banc One, San Francisco-based BankAmerica Corp. and NationsBank Corp. of Charlotte, N.C., all aggressive players in the acquisition field.
Recent additions to the list are Cleveland-based Key Corp. and U.S. Bancorp of Minneapolis, formerly First Bank System Inc.
A similar boomlet drove up First Chicago’s stock price in August, when it soared 16 percent in eight trading sessions. The stock then fell back but has continued to bounce around since then.
“First Chicago is in an attractive market in the Midwest; it’s a great franchise, has the fifth-largest credit-card portfolio and holds about 25 percent of the market’s deposits,” McDermott said. “Those are all good reasons for wanting to remain independent. But they’re also good reasons to attract the interest of other banks.”
But veteran analyst George Salem of Gerard, Klauer, Mattison & Co. in New York called the takeover rumor “one of the greatest hoaxes I’ve seen in my career.”
“It’s not hard to start a rumor on Wall Street,” he said. “But this one was masterfully done. If there was anything to it, they wouldn’t have let the stock fall back if they had knowledge of a deal.”
He said NationsBank has “a full belly” with its planned acquisition of Barnett Banks Inc. of Florida.
BankAmerica is pulling out of Jewel-Osco supermarkets in Chicago after admitting failure to its 1 1/2-year effort to invade the retail banking market here.
Banc One “has geography and its own big credit-card operation, which would fit in well” with First Chicago NBD, Salem said. But it’s still digesting recent acquisitions.
Banks are going for increasingly higher prices as giant holding companies compete more aggressively for choice plums in the industry.
The biggest deal announced so far involves Charlotte-based First Union Corp.’s bid to buy CoreStates Financial Corp. of Philadelphia for about $16 billion in stock–or five times its book, or net asset, value. A few years ago, the typical bank went for 1.5 to 2.5 times book value.
First Chicago NBD, which has assets of $113.3 billion, had a book value of $26.6 billion as of Sept. 30. At Wednesday’s closing price, its common stock was selling for nearly 3 times book value and about 16 times earnings. It had deposits of $67.6 billion and loans of $67.8 billion and 33,727 full-time employees.
