Enactment of interstate banking by Congress stirred activity in several bank stocks on Wednesday, but the long anticipated nod from Washington did not spur a general bank rally.
The biggest gainer was Mercantile Bancorp., St. Louis, while Barnett Banks Inc., Jacksonville, Fla., advanccd 50 cents to $46.75.
"It was somewhat anticlimactic, but in the long mn it is going to accelerate the consolidation trend in the industry," said Frank J. Barkocy of Advest Inc.
"It will open virtually all markets to mergers and acquisitions and spur some institutions to speed up their game plans before somebody knocks on their door," he said.
The analyst said he also anticipated that "at least by mid-1997, and in some states earlier, we should see some new efficiencies out of the movement to create branching networks from banking networks."
The new federal legislation will end the prohibition on branching across state lines that now forces banks to set up separate subsidiaries in each state where they operate.
"The new law is really going to benefit each bank in its own way," Mr. Barkocy said.
Banks in states like Missouri and Kansas, where restrictions on mergers still exist, will be among the most directly affected.
"The date for the big dance has finally been announced. Now the heavy dating can commence," said Joseph A. Stieven of Stifel, Nicolaus & Co., St. Louis.
He attributed the strength in Mercantile's stock to the news. The bank has long been viewed as a likely takeover candidate in a nationwide banking scenario.
Fourth Financial Corp., Wichita, Kan, the largest bank in its state, is regarded by some industry watchers as an acquisition candidate. Its shares were up 37.5 cents to 30.25.
Barnett, Florida's largest bank and last remaining independent, is seen by many on Wall Street as the nation's prime takeover target after the demise of the Southeast compact, which now seems assured.
Shares of several banks in other areas of the country that are often seen as possible acquisition candidates advanced as well on Wednesday.
First Interstate Bancorp, Los Angeles, rose 87.5 cents to $81, and UJB Financial Corp., Princeton, N.J., advanced 75 cents to $28.625. Shares of First Virginia Banks Inc., Falls Church, gained 37.5 cents to $39.50.
None of these banks are known to be seeking a merger partner or buyout. All assert they are pursuing an independent course.
Also directly affected are North Carolina's big superregional companies, especially First Union Corp. and NationsBank Corp., which have been confined to regional expansion by the decade-old compact.
But some bank analysts expect little significant impact in the foreseeable future from the legislation.
"It would have meant a lot 10 years ago," but interstate banking is already a reality in some form in most major areas of the country, said Mark T. Lynch of Lehman Brothers.
"We'll see a few deals allowed by this, mostly driven by cost savings and geographic proximity. I don't anticipate many big hops from region to region," he said.
He noted one exception. "I wouldn't be too surprised to see some banks go down to Florida and buy community banks."
Mr. Lynch said he felt the long-term impact will be felt after the most active banks complete their "regional empires" and when business conditions less favorable for banks than those now prompt more "willing sellers" than exist currently.
"Then we will be able to put together some national banking franchises," he said. "But as things are right now, I don't think enough people are ready for that."
Another analyst thinks a big impact of the legislation, in lifting branching restrictions, will be to put a cap on the franchise value of banks regarded as sellers.
"Those who still think they are worth three times their book [value per share] should discard that idea right away. We are going to get to realistic pricing," said John D. Rooney Jr. of Legg Mason, Wood Walker Inc.
For instance, with branching ability, he said, big New York companies like Citicorp or Chemical Banking Corp. wanting to enter affluent areas of suburban Connecticut may be willing to pay to 1.5 to 1.7 times book value for a solid and established franchise, he said.
"But it will hardly make sense to them to pay 2.2 times book or more," he said, "particularly when the franchise for sale may have branches they don't even want."
"By and large, lfa bank is thinking at all of selling its franchise, it [should] do so in the next 12 to 15 months," Mr. Rooney said.
The pending federal law permits consolidation of existing branches mn in different states as of June 1, 1997, unless individual states opt out. It does not allow entry into a state by branching across state lines for five years.