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Markets & Stocks
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Bank mergers: There will be more
First Bank One/J.P. Morgan and now Union Planters and Regions Financial. Who's next?
January 23, 2004: 12:37 PM EST
By Dan Cook, CNN/Money contributing writer

Portland, Oregon (CNN/Money) - The question wasn't, Would the Bank One/J.P. Morgan deal trigger more deals? Rather, it was, How fast would the rest of the dominoes fall?

It's beginning to look like the answer is: Very fast.

The announcement early today that Regions Financial Corp (RF: Research, Estimates). and United Planters Corp. (UPC: Research, Estimates) are merging to form a Southeast superregional banking center sent a shot of adrenalin through the entire industry.

Shares of small-and-mid-cap banks, active ever since the Bank One/J.P. Morgan deal, were on the move.

More on bank mergers
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Regions, Union Planters to merge
The J.P. Morgan/Bank One merger

BB&T Corp., a southern regional, shot up at Friday's opening, as did SunTrust, a Regions competitor. Comerica and Commerce Bancorp, widely seen as likely targets, continued to be pushed by speculation, as did many other regionals.

The Regions/Planters deal came as little surprise and most likely sets the tone for what's coming down the road.

"The oblique feedback that I'm getting from a number of bank CEOs is that discussion levels [regarding M & A] are very high in the industry," said Jay Tejera, bank analyst with Ragen McKenzie in Seattle.

Rosalind Looby of Credit Suisse/First Boston acknowledged that the Regions/United Planters deal made sense. "UPC and Regions have complementary geographies and will enjoy considerable market share in the South Central US," she said, noting that Planters was low-hanging fruit from a merger standpoint.

So who's next?

One deal that makes a lot of sense: Key Corp. and National City Corp. "They're located right across a plaza from each other in Cleveland," said Ragen McKenzie's Tejera. "They would create one strong bank in the Ohio market. It's a natural."

He views Key as troubled and in need of a stronger partner. National City, by contrast, "has executed well and could benefit from the combination," said Tejera.

"Key Corp. has had seven years of flat earnings." He places Key in a "need to be sold" category along with PNC and Comerica.

Comerica (CMA: Research, Estimates), a $55 billion-asset operation based in Detroit, was up 1.5 percent Friday. It focuses on three areas: business, individual and investment banking. In early trading today it was up 1.5%, to $58.81. It has more than 500 branches, concentrated in Michigan, California, Florida and Texas but with beachheads in Canada and Mexico. Comerica has deposits exceeding $40 billion and another $40-billion-plus in loans in its portfolio.

Commerce Bancorp (CBH: Research, Estimates) is slightly smaller, with about $21 billion in assets. Shares have been volatile since the Bank One/J.P. Morgan deal and actually peaked for the week at Wednesday's opening near the 52-week high of $58.95. The Cherry Hill, N. J., bank is a holding company for four nationally chartered bank subsidiaries boasting 270 branches in four Eastern states.

PNC Financial (PNC: Research, Estimates), seen by several analysts as a clear candidate, rose 2 percent in early trading Friday.

SouthTrust was also up more than 2 percent early on, while SunTrust, Charter One Financial and Key all rose more than a percent.

Washington Mutual (WM: Research, Estimates), the big Seattle-based savings and loan, with assets of $287 billion and a market value of around $40 billion, moved higher as well. But Tejera doesn't see Washington Mutual making overtures to anyone just yet. And he doesn't think a hostile deal is in the cards. Tejera sees no reason for Washington Mutual's board to pursue a merger, since the company's growth prospects are strong.

"There are very few banks in the Top 25 that are growing as fast as Washington Mutual," he said, "so it has no incentive to sell."  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.