Seeking to assure Wall Street about its extensive use of derivatives, Banc One Corp. will hold a series of investor conferences to explain its interest rate swap strategy.
"We sense that our stock price, to some extent, is a victim of a gross misunderstanding about what is going on here," said Richard Lodge, chief investment officer at the Ohio-based banking company.
Banc One's stock has been trading in the range of about $36 per share, or roughly 190% of book value. While that's a respectable multiple in this sagging market for bank stocks, it is nowhere near the price-to-book multiple that the company enjoyed for years.
One explanation for Wall Street's coolness, company officials say, is the bank's $31 billion portfolio of interest rate swaps.
In the majority of these contracts, Banc One pledges floating-rate interest payments in exchange for fixed rate payments supplied by counterparties.
Because of the potential volatility of derivatives, and the absence of standardized banking reports on their use, some investors have shied away from banks heavily involved in the financial contracts.
But Banc One has argued -- less than successfully, apparently -- that the instruments help it manage interest rate risk far more efficiently than it could through traditional techniques.
Chairman and chief executive John McCoy, along with Mr. Lodge and other top officers at Banc One, will appear at two December seminars devoted exclusively to derivatives. One will be held in New York; the other in Boston.
The company expects as many as 200 attendees at each conference, including institutional investors, analysts, and financial journalists.