Bay View Eyed As a Prime Merger Play
Takeover speculators may want to turn their sights to Bay View Capital Corp. of San Mateo, Calif.
The healthy thrift company, which has $2.9 billion in assets, is being cited by some bank analysts as a potential target that doesn't yet have a premium in its stock price.
The premium is probably absent because Bay View's earnings have been weakened during two of the past three quarters by big increases in loan loss reserves after regulatory exams and by the thrift's suspension of all but single-family residential lending.
Acquisition Stalled
Moreover, regulatory delays have ensnarled Bay View's proposed purchase of the Bay Area branches of Western Federal Savings of Marina del Rey, Calif.
But Wall Street professionals think its earnings are headed back to normal levels. Lawrence R. Vitale, a bank analyst in Chicago with Kemper Securities Group, said he is "comfortable with Bay View's fundamentals" and termed it "the cheapest quality company" he follows among Western banks and thrifts.
Bay View was trading at $21 Thursday afternoon, up 37.5 cents. The stock has mostly moved in a narrow range of $20.50-$22.50 since mid-August, despite the merger activity that has stirred other bank and thrift stocks.
Management Receptive to Bid
Bay View is a "prime takeover target" and its management has expressed a willingness to consider offers, Mr. Vitale noted, "but virtually no takeover expectations are reflected in the stock. Its reaction to the recent merger activity in California has been muted at best."
The company has offices in the San Francisco bay area and in suburban Orange County near Los Angeles. A traditional thrift, it specializes in single-family mortgages and small apartment loans. It has made some commercial real estate and consumer loans, but no construction loans.
Over the last two years the thrift has made direct investments in real estate that have since lost money. But the portfolio was written down substantially in the fourth quarter of 1990 and should not spur future losses, Mr. Vitale said.
A company spokesman could not be reached for comment Thursday.
"Asset quality appears fairly stable and reserves have been substantially increased," said David S. Hochstim, an analyst in New York at Bear, Stearns & Co. "This leads us to feel comfortable with Bay View's credit outlook."
The stock trades at only 6.5 times Mr. Hochstim's 1992 estimate earnings of $3.35 a share and well below its tangible book value of $26.04 a share, Mr. Hochstim noted, despite exceeding fully phased-in capital levels "by a wide margin."
Mr. Vitale said that "in an acquisition -- and potential buyers are many -- we believe a price around 125% of book value, or something in the mid to high $30 per share, is possible."
