Shares of Centura Banks Inc. fell another 6.82% Thursday as analysts continued to adjust their ratings on the Rocky Mount, N.C., company because of unexpected interest rate risk from a February acquisition.
Heather L. Dilbeck of Ryan, Beck & Co. downgraded the stock Thursday to "hold" from "buy." She also lowered her per-share earnings estimates from $1.05 to $1 for the first quarter, to $4.05 from $4.30 for the full year, and to $4.50 from $4.95 for next year.
The First Call consensus on the $11.2 billion-asset company's 2000 earnings had fallen to $1.04 a share by Monday, from $1.08 in early April.
Analysts attributed their growing negativism in the company to problems stemming from its February purchase of Triangle Bancorp.
"In the first quarter management attributed about 10 basis points of margin shrinkage to the restructuring of the Triangle portfolio and indicated that this should be recaptured in the second quarter," the Ryan, Beck report said. "Due to the current rate environment we believe this may not be fully realized."
Centura seems to be suffering from a "touch of merger indigestion," Ms. Dilbeck said in an interview.
On Monday, Robinson-Humphrey Co. downgraded Centura to "outperform" from buy and lowered its 2000 earnings-per-share estimates to $4 from $4.35. The next day Marni Pont O'Doherty of Keefe, Bruyette & Woods lowered her stock rating to "market perform" from "outperform" and her 2000 profit estimate to $4 a share from $4.25.
"We would reiterate these estimates remain somewhat preliminary, and we expect to get a better read on the quarter and the outlook for 2000 next week. That said, we suspect the stock may remain under pressure until the market has digested the lower consensus earnings," the Keefe, Bruyette report said.
Not every analyst, however, is negative on Centura. John B. Moore Jr. of Wachovia Securities Inc. rates the banking company a "strong buy." He could not be reached for comment, but said in a May 31 report:
"We believe that the acquisition of Triangle Bancorp will enhance Centura's market profile. The shares currently trade 8.9 times our 2001 estimate of $4.85 versus median multiple of 9.9 times for our universe of banks. We believe that our 2000 estimate is reasonable given the expected level of cost savings associated with the merger. We continue to rate the stock a Strong Buy for capital gains/high-risk accounts."
And even those that downgraded the banking company recently have not completely lost faith. Robinson-Humphrey said it expects the stock to benefit from the pending sale of a competitor, CCB Financial of Durham, N.C.
Nonetheless, Centura's stock price is feeling the heat. "There seems to be a knee jerk reaction in the market," Ms. Dilbeck said. "The market seems to be looking for a reason to sell."
Indeed, Thursday was an off day for most bank stocks, as banks succumbed to profit taking after a rally on Wednesday. American Banker's index of 225 stocks plunged 2.62% Thursday, to 738.4, and its index of the top 50 banking companies dropped 2.34%, to 577.9.
"There is schizophrenia in this group," said Steven Eisman, an equities analyst with CIBC World Markets. Investors are whacking bank stocks "both ways like a ping-pong ball."