Despite six acquisitions this year and stock prices falling across the industry, Commerce Bancshares Inc. of Kansas City, Mo., has defied the odds and maintained a healthy share price.
Since the end of August, banks have suffered an 8% plunge, on average, from their year highs. But Commerce has decreased only 5%. And since October 5, Commerce shares have risen roughly 8%.
On Monday, Commerce finished at $32, up 75 cents.
"This is typical Commerce," said Joseph A. Stieven of Stifel, Nicolaus & Co., Inc. "The concept of avoiding unnecessary risk is one of their goals. By providing consistent returns to stockholders it is a less volatile stock,"
The company has one of the strongest credit records of any in the business. Nonperforming assets are less than haft of 1%.
And earnings per share were strong at 79 cents in the third quarter, said Joseph Duwan of Keefe, Bruyette & Woods, Inc.
However, Commerce took only a $280,000 loan-loss provision in the quarter, he added, or three basis points. That will have to increase, be said.
Another driving force behind the stable stock price is the high rate of insider ownership, Mr. Stieven pointed out. The Kemper family, which has run the bank for four generations, owns almost 10% of the nearly 32 million shares outstanding.
Kemper family members fill the posts of chairman, chief executive, president, and chief financial officer, and have a personal stake in keeping the stock high, Mr. Stieven explained.
However, high insider ownership can act as a takeover deterrent, and this may keep the stock from rising further. The Kempers have indicated no intention to sell the bank.
As-interstate banking barriers fall and rumors swirl around Wichita, Kan.-based Fourth Financial, Commerce's stock may not receive a takeover premium.
Commerce's stock is trading at 138% price to book value, roughly 15 percent less than the average of Stifel, Nicolaus' midwestern bank universe.
In the last year, Commerce has added roughly $1.4 billion of assets, assuming all pending transactions are completed.
In all, the deals should bring Commerce to $9 billion in assets, an 18% increase since the end of last year.
Commerce follows what midwesterners have dubbed the 1-70 expansion strategy, a reference to the highway that runs between St. Louis and Kansas City.
But of late, Commerce has moved outside Missouri and into neighboring states like Illinois and Kansas.
Two weeks ago, Commerce bought $650 million-asset Union Bancshares, doubling its presence in Kansas.
And in late September, Commerce bought $450 million asset Peoples Mid-Illinois Corp., doubling its presence in central Illinois.
Mr. Duwan said the Illinois deal was a little pricey, but noted expansion in central Illinois is a top priority for Commerce. Also, Commerce paid for the Kansas deal in cash, so dilution should be minimal, Mr. Duwan added.
Overall earnings per share dilution in 1995 should be less than 1% to 2%, predicted Mr. Stieven.
On Monday, Merrill Lynch analyst Judah Krausbaar upgraded his near-term rating on Citicorp from neutral to above average and raised his 1995 earnings per share estimate from $6.10 to $6.55.
Mr. Kraushaar said he expected the money-center, in an attempt to demonstrate financial discipline, would soon announce a series of cost-cutting measures, a stock buyback, and a dividend increase.
Citicorp finished up 62.5 cents at $45.875.
Also on Monday, Natwest Securities analyst John Heffern initiated coverage of State Street Bank with an accumulate rating. State Street finished unchanged at $32.375.
