Some regional banking companies are not getting the recognition they deserve from investors, but that could soon change, some analysts say.
"We believe that the middle-market bank group may be due to break out of the doldrums it has been in for the last 10 months, as value investments regain favor over momentum- and liquidity-driven stocks," said Kenneth Puglisi, banking analyst at Sandler O'Neill & Partners. "As this occurs, companies with superior fundamentals and low market valuations will be among the best performers."
He likes Associated Banc-Corp. of Green Bay, Wis., an $11.3 billion institution, because of the way it does business. Associated, which is surrounded by such acquisitive banks as Bank One Corp., U.S. Bancorp, and Wells Fargo & Co., also could be a merger target, he said.
Eric Rothmann, banking analyst at Stephens Inc., likes Amsouth Bancorp, saying the Birmingham, Ala., banking company "continues to rationalize its line of businesses for improved profitability. Goals are aggressive but realistic given its marketplace and product base."
Mr. Rothmann said Firstar, of Milwaukee, offers profitability, products, franchise capability, and strong management. "This central U.S. powerhouse is building earnings off its significant cross-selling capabilities, seeing increased fee revenues and opportunities for franchise synergies," he said.
After turning down an offer of $90 a share from Bank of New York, Pittsburgh-based Mellon Bank set its sights on improving operations, Mr. Rothmann said.
"This goal should be achieved through the continued leveraging of its fee-based lines of business acquisitions," Mr. Rothmann said, "as well as through joint ventures and acquisitions both nationally and internationally.
"If the price target is not achieved, we think the franchise would be worth about $100 a share in a takeout scenario," he said.
PNC Bank Corp. of Pittsburgh continues to beat analyst projections, Mr. Rothmann said.
Most of PNC's operations continue to meet or exceed its internal hurdle rates, he said.
Management at SouthTrust Corp. of Birmingham, Ala., "remains committed to maintaining one of the industry's most sales-oriented banking cultures," Mr. Rothmann said. "Excess capital is deployed only to promote the expansion of the franchise, not for financially engineering earnings."
Acquisitions "must match SouthTrust's sales culture," he said.
Southwest Bank of Texas, Houston, "operates in an outstanding one-city economic marketplace that continues diversifying away from the hydrocarbon industry," Mr. Rothmann said. "The franchise operates under a very aggressive sales and growth culture.
"With expectations of strong, double-digit earnings growth over the next several years and a rebounding of Oil Patch businesses, we think this is a buying opportunity."
Regions Financial of Birmingham "has grown substantially, not only in size, but also in the breadth of the markets in which it operates," Mr. Rothmann said.
He said the franchise "has not lost its niche as a superregional bank with a community bank feel."
