Cole Taylor Financial Group Inc.'s plan to spin off its bank and focus on automobile financing has analysts raising their ratings and earnings estimates on the company.
Last week, the $2.1 billion-asset suburban Chicago company announced it would sell its Cole Taylor Bank to an investment group headed by several members of its co-founding Taylor family.
The holding company, meanwhile, will focus exclusively on its profitable subprime automobile financing business, known as Reliance Acceptance Corp.
Cole Taylor's stock had surpassed $28 on Tuesday, climbing from just over $24 before the announcement.
Meanwhile, at least two investment analysts have raised their ratings on Cole Taylor's stock and boosted their earnings estimates.
Steven R. Schroll of Minneapolis' Piper Jaffray Inc. on Monday raised his rating to a "strong buy," and increased his 1997 earnings estimate to $2.85 per share from $2.40.
Reliance should achieve good growth because it will be free of holding company regulations and will be extremely well-capitalized, he said. The Taylors will return more than four million shares to the holding company, which will retire them. They also will pay about $60 million in cash and $30 million in auto loan receivables.
Bill Ryan of Prudential Securities Inc., New York, also raised his rating to a "buy" on Tuesday and hiked his 1997 estimate to $2.70 per share from $2.40. Despite credit quality issues at some consumer finance companies, Mr. Ryan said in his report that he sees "positive trends" at Reliance.
Robert C. Ollech, an analyst in Milwaukee with Principal Financial Securities, said he is considering raising his own 1997 estimates upward from $2.40 per share.
"I view what's happened as a real positive thing for the stock," said Mr. Ollech, who has had a "hold" on the stock since Cole Taylor hired investment bankers to consider its options last fall. He said investors now won't have to value both the bank and finance company aspects of Cole Taylor.
Announcing the split ended months of uncertainty over the Wheeling, Ill., company's future. Previous public disagreements between the co- founding Taylor and Cole families led to last October's announcement that the company had hired Chicago Corp. and Sandler O'Neill & Partners.
