Citicorp shares jumped Friday, as investors turned optimistic after the bank announced plans to sell a 20% stake in its student loan business to the public.
Shares of the bank were among the most active on the New York Stock Exchange, with volume nearly reaching two million, double the daily norm. Shares rose 62.5 cents, to $17.50.
In an overall lackluster trading day, share prices of several other banks rose, too. Barnett Banks' stock price jumped $1.125, to close at $41.125, on investors' belief that the bank was finally making strides in reducing costs and the renewed rumor that a takeover bid from NationsBank Corp. was in the offing.
NationsBank's stock rose 87.5 cents, to $47.75, on a report that the Charlotte, N.C., bank was going to purchase Chrysler First Inc., the consumer finance arm of Chrysler Corp.
In the general market, the Dow Jones industrial average fell 3.78 points to finish at 3,240.06, a lackluster reaction to the news that 27,000 nonfarm jobs were added in October. Banks stocks were generally up Friday.
Investors focused on Citicorp after its announcement Thursday that it planned to sell a stake in its student loan business.
Citicorp stands to bring in about $60 million in capital through the sale, said analysts. That new capital won't fuel a sizable boost in capital ratios.
But investors saw the sale as another sign of Citicorp moving in the right direction: Raising capital and taking a hard look at business lines. The issue of Citicorp's need for capital has kept some investors on the sidelines.
Of Two Minds
"The market is back and forth on whether Citicorp needs to issue additional common stock," said Harlan Sonderling, an analyst with the Putnam Group in Boston. "Those that are more optimistic about the bank's capital are buying."
Analysts said that Citicorp has had other good news recently. The sale of mortgage loans to Fannie Mae, announced recently, was interpreted as a sign that the mortgage business was no longer shaky.
Some analysts said Citicorp's rise in share price was in keeping with the increases other turn-around stocks saw on Friday.
On the Upswing
Chase Manhattan's shares rose 37.5 cents, to close at $24.625. The New York bank's shares have risen about 12% in the past month. Bank of New York Co.'s shares gained 75 cents, to close at $47.875.
"Investors see the economy as getting better," said Stephen J. Paluszek, an analyst with M.A. Schapiro & Co. "That's why we see the cyclical banks moving today."
That movement may be one sign that the election of President-elect Bill Clinton has had a positive effect on bank stocks.
His plans to spur an economic recovery have given some investors heart. And Mr. Clinton's perceived advocacy of interstate banking may have helped move Barnett's stock as well.
Prospects for Branching
The scenario runs like this: Interstate banking becomes law early in the Clinton administration, and NationsBank is pushed to take over Barnett before another bank does.
NationsBank has made no bones about its interest in expanding in Florida, and Barnett is the biggest independent bank in the state.
But analysts said even if the takeover play is discounted, Barnett's shares look good.
"Barnett is a win-win situation for investors," said Mr. Sonderling. "Either the bank continues to fix up its credit-quality and costs or it is acquired by NationsBank."
Barnett shares traded furiously Friday, with more than half a million changing hands, about triple the average daily volume.
What's making analysts so optimistic is Barnett's progress in controlling costs.
For years, the bank has had high overhead, which it has struggled to cut.
The bank will meet with analysts Nov. 16 and 17, and analysts expect the bank to announce that it is ahead of schedule in cutting expenses related to its merger with First Florida Banks Inc., Tampa.
Some analysts may raise their earnings estimates for the bank, based on lower overhead.