Since PNC Bank Corp. expanded its stock buyback program Aug. 15, president James E. Rohr has exercised stock options and sold nearly half his shares in the bank, augmenting his $570,000 salary by $1.54 million.

Two weeks after Chase Manhattan Corp. announced a buyback on Oct. 15, chief fiscal officer Peter Tobin and treasurer Deborah Duncan sold option- related stock worth $850,000 and $1.77 million, respectively.

Five days after CoreStates Financial Corp. announced a buyback program, its chief of technology, Robert Gilmore, cashed in stock options worth $4.45 million.

And since First Bank Systems Inc. announced a share repurchase plan Feb. 21, John F. Grundhofer, its president, CEO, and chairman, has supplemented his $620,000 salary by cashing in stock options worth $1.8 million.

With bank stocks soaring this year, it is not surprising that many executives would decide to exercise options now. But with bank buyback programs at an all-time high this year, a rise in insider transactions at the same banks is beginning to raise eyebrows.

The insider sales "contradict the spirit" of buyback programs, said Robert Gabele, who tracks insider trading for CDA/Investnet, Fort Lauderdale, Fla.

"The notion of a buyback is the shares are undervalued and reducing the number of shares will increase the value of the rest," Mr. Gabele said.

Instead, buybacks appear to have become an important way to cover the costs of executives cashing in their lucrative stock options, analysts say.

"The more options are granted, the more banks buy back shares to offset those stocks entering the market," said Dennis Shea, bank analyst at Morgan Stanley & Co.

Banks, meanwhile, defend the buybacks as the best way to deploy capital when loan growth has stagnated.

In the early 1990s, an industrywide slump was accompanied by a rise in the number of bank buybacks, as banks initiated the programs for the traditional reason.

Now, it's hard to use undervaluation of shares as an argument for buying back shares, because most bank issues are trading at an all-time high.

First Bank spokeswoman Wendy Raway said the bank buys back shares for "capital management" purposes, not to increase their market value. She added that bank policy permits executives to sell stock only during the 20 days beginning on the third business day after earnings are reported.

"Compared to other industries, that's a very conservative policy," Ms. Raway said.

Other banks with buyback programs, in which executives had exercised options, had similar responses or refused to comment.

CoreState said Mr. Gilmore cashed in his options because he was leaving the bank

Like nearly everyone on Wall Street, Morgan Stanley's Mr. Shea lauds stock buyback programs. He sees them as an efficient way to deploy excess cash. Because bank earnings are growing much faster than banks' ability to make good loans, he says, it makes sense to return the extra money to shareholders by buying back their shares.

"Buybacks are pretty much expected," he said.

They certainly have become more common: 205 banks have announced share repurchase programs this year, up from only 62 in 1993, according to Securities Data Co.

Many banks and other corporations maintain a stock buyback program as a matter of course, said David Ikenberry, a professor of finance at Rice University who has studied repurchasing programs. But the programs are usually active only at selected times - when shares are undervalued or when there is no other way to invest capital.

Mr. Ikenberry said his study of 1,200 stock buybacks over 10 years in a variety of industries showed stock prices typically rise 3.5% in the two days after a buyback is announced - about the same as receiving an upgrade from a brokerage firm.

That insiders may be profiting as a result of buybacks raises a question about their motivation. Are the buybacks so attractive to executives that it is diverting capital from worthy loans?

Mark Zandi, chief economist at Regional Financial Associates, West Chester, Pa., says that's not an issue, because bank capital levels are so high they can buy back shares without cutting into loans or other business- building activities.

"As long as the economy is good, they can pretty much keep doing what they are doing," Mr. Zandi said.

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