Chase Seen As Winner In Bidding For Citytrust
The government is expected to announce tomorrow the sale of Citytrust Bancorp to Chase Manhattan Corp., according to investment banking sources and others close to the bidding process.
The Federal Deposit Insurance Corp. had originally packaged Citytrust with Mechanics and Farmers Savings Bank, both of which are insolvent and based in Bridgeport, Conn. But it is unclear whether Chase submitted a bid for Mechanics. Citytrust has $2.1 billion in assets, and Mechanics has $1.2 billion in assets.
A spokesman for the FDIC would not comment. Officials of Chase and Citytrust also had no comment.
The acquisition would give New York -based Chase its long-desired entree into neighboring Connecticut.
Bid by Connecticut Banks
Two Connecticut banks - Waterbury-based Centerbank and Norwalk-based Gateway Bank - submitted a bid for Mechanics and Farmers, a well-placed source said. But the government was reportedly cool to the offer. The $1.3 billion-asset Gateway is steeped with nonperforming loans and lost $26 million last year, while Centerbank recently installed an untested management team.
Several other companies are believed to have conducted intensive examinations of Citytrust but elected not to bid. These include BankAmerica Corp., Bank of Boston Corp., Bank of New York Co., Chemical Banking Corp., Citicorp, Republic New York Corp., and Shawmut National Corp.
Chase and most of its money-center competitors are eager to expand into Connecticut's affluent Fairfield County, where Citytrust is based. Though Bridgeport is a working-class community, it could provide a base for Chase to build branches throughout the state.
Small Capital Infusion
Investment bankers estimate that Chase will add a relatively skimpy $85 million to $90 million in capital to Citytrust. It is unclear how much the government might contribute as part of a purchase and assumption deal. As of March 31, Citytrust had negative capital of $89 million.
Although Chase has relatively weak capital ratios, it could easily cover the purchase price by selling some of its investment portfolio, bankers said.
Chase will probably pay no more than $45 million for Citytrust's $1.9 billion of deposits, a premium of less than 1.5%, according to investment bankers.
At the end of the first quarter, Citytrust had $428 million of nonperforming loans, representing 23% of its $1.53 billion loan portfolio. The company has not yet reported second-quarter results.