Stocks: Hot Stock: New Jersey's Commerce Bancorp Rates No. 1 with Wall

Takeover prospects and strong earnings have made Commerce Bancorp one of the hottest bank stocks around.

As of Thursday, Commerce was analysts' highest-rated bank stock of the week, according to First Call Corp. The consensus view was "strong buy."

The Cherry Hill-based bank's shares reached a new 52-week high of $26.81 during intraday trading. At day's end Commerce was at $26.50 , up 50 cents on more than twice daily volume. The strong trading followed a week in which shares rose more than 10%.

As consolidation has heated up in New Jersey, speculation about Commerce has increased.

Analyst David Stumpf of A.G. Edwards & Co. said that despite the bank's strong earnings, its stock trades at a discount because historically it has not drawn much attention as a takeover candidate.

His 1996 and 1997 earning estimates are $2.18 and $2.50, respectively. Mr. Stumpf's 12-month target price is $30.

Likely suitors could include Summit Bancorp., First Union Corp., and Mellon Bank, he said.

Mr. Stumpf and other analysts, however, said they doubt the $2.4 billion-asset company will be taken over soon.

"This is a company that is staunchly independent," Mr. Stumpf said. "They can return better growth than anybody who can buy them - there is no need to join up with a partner." Mr. Stumpf initiated coverage on the bank with a "buy" rating on Wednesday.

He noted that First Union still is digesting its recent merger with First Fidelity, as well as a mutual fund acquisition, and Summit announced two weeks ago that it was acquiring BMJ Financial Corp.

Analyst Katrina Blecher of Gruntal & Co. said Commerce is an attractive takeover candidate, but not the most attractive one in New Jersey. She awards that distinction to Summit.

"Banks want companies that have multi-state presence or dominant position in the state," she said. "They are not interested in fill-in acquisitions."

Ms. Blecher, the lone analyst to have a "hold" rating on Commerce, said the company's stock is "fully valued" because of the takeover speculation.

Analyst Kenneth Puglisi of Sandler, O'Neil & Partners also cited Commerce as a takeover target because regional bank stocks trade at a higher price-to-earnings multiple than community banks.

He attributed Commerce's price surge to its strong earnings, a cheap stock price, and an attractive franchise. But he added, "I don't think Commerce is for sale."

Commerce, currently listed on the Nasdaq, will begin trading on the New York Stock Exchange on Sept. 26.

In trading Thursday, bank stocks were up after the Department of Labor reported a mild rise in the producer price index in August, easing inflation anxieties.

The Standard & Poor's bank index rose 0.62%, while the Nasdaq bank index climbed 0.23%. The Dow Jones industrial average gained 0.30%, and the S&P 500 jumped 0.58%.

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