N.C. Banks' Stocks Rise on Merger Talk

CCB Financial Corp's shares surged Wednesday as merger rumors continued to swirl about North Carolina's three remaining midsize banks.

Stock of $5 billion CCB Financial rose 6.30% on a day when profit taking caused many bank stocks to retreat.

The Standard & Poor's bank index lost 0.03%, while the Dow Jones industrial average climbed 0.51% The S&P 500 gained 0.24%.

Since Southern National Corp. of Winston Salem announced that it would acquire United Carolina Bancshares two weeks ago, the stock prices of First Citizens Inc. and Centura Corp., both in North Carolina, have appreciated considerably.

Shares of First Citizens Inc., a closely held bank, climbed 11.7%, while Centura's shares gained 9.2%. CCB Financial stock, however, gained 18.2% in the same period.

The surge in Durham-based CCB Financial's stock is more substantial because the company is a bargain compared with the others, explained analyst James Schutz of Chicago Corp.

Mr. Schutz noted that unlike its peers, which have been trading at 12 to 13 times projected 1997 earnings, CCB Financial last month traded at a multiple of 10.5.

Analyst Merrill Ross of Wheat First Butcher & Singer said she expects the bank's stock price to retreat once the speculation dissipates.

Then she expects the CCB's share price to appreciate again - this time because its business fundamentals warrant it.

"CCB Financial has a strong balance sheet, very low charge off levels, and an attractive customer base," said Ms. Ross, who raised her 12-month price target two days ago. "Their earnings are up and we expect that to continue."

Analysts said that potential buyers include NationsBank Corp. of Charlotte; PNC Bank Corp. of Pittsburgh; Barnett Banks Inc. of Jacksonville, Fla.; SunTrust Bank Inc. of Atlanta; and Amsouth Corp. of Birmingham, Ala.

But few are taking the rumors seriously.

"We have heard rumors about CCB Financial on and off for years," said Paul Stock, executive vice president of the Community Bankers Association of North Carolina. "But the bottom line is that there has been precious little to base on that speculation. It is fairly idle talk."

Mr. Schutz's said that he expects the bank to affiliate with a larger institution, but he "doubts that it is happening now."

Ms. Ross noted that CCB Financial and North Carolina's two other midsize banks also have a following of retail investors who tend to speculate more on mergers than their institutional counterparts.

Nevertheless, Ms. Ross won't completely discount a takeover of CCB Financial in the near term.

"Hugh McColl, once said that he didn't buy Boatmen's to be in Arkansas; he bought it for customer base," said Mr. Ross referring to NationsBank's chairman. "You can say the same thing for CCB Financial; it has an excellent branch profile."

Salomon Brothers Inc. initiated coverage on H.F. Ahmanson & Co., Dime Bancorp and Great Western Financial Corp. with "hold" ratings. It awarded initial "buy" ratings to Washington Mutual Inc. and Charter One Financial.

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