The pending sale of Commerce Bancorp Inc. of Cherry Hill, N.J., could be good news for BankAtlantic Bancorp Inc. of Fort Lauderdale — and its investors.
Though the $48 billion-asset Commerce is just a small player in Florida, it is viewed widely as a serious threat to the $6.5 billion-asset BankAtlantic, because the companies’ retail-focused business models are so similar and Commerce has deep enough pockets to build a statewide branch network.
Commerce, which announced this week that it is selling itself to Toronto-Dominion Bank’s TD Banknorth Inc., is expected to retain its identity in Florida, but under the new ownership “there is the potential that its Florida franchise will likely get less emphasis,” Albert Savastano, an analyst at Fox-Pitt, Kelton Cochran Caronia Waller, wrote in an research note issued Tuesday. “The perception for … [BankAtlantic] is that competitive pressures will be eased.”
Commerce entered Florida in 2005 by acquiring the $350 million-asset Palm Beach County Bank in West Palm Beach and has said it intends to have 150 branches in the state within the next six years. It currently has 12 in three counties there.
Partially in response to Commerce’s ambitions of its new competitor — as well as slowing same-store deposit growth — BankAtlantic launched a branch expansion of its own. It opened 23 branches between the first quarter of 2005 and the second quarter of this year, and it expects to open 14 more by yearend.
But the costs associated with the expansion have been a drag on BankAtlantic’s earnings. Its noninterest expenses soared 51% last year from two years earlier, to $292 million.
Analysts and investors, who have seen the value of their shares decline by more than half since mid-2005, to $9.15 late Thursday, have been clamoring for BankAtlantic to cut costs. Though Mr. Savastano does not expect BankAtlantic to scale back its expansion plans, he wrote that he expects competition with Commerce — for branch locations and talent — to let up.
The outlook for BankAtlantic “is certainly brighter,” he wrote.
Theodore Kovaleff, an analyst at Sky Capital LLC in New York, said the recent departure of Vernon W. Hill 2nd, Commerce’s founder and former top executive, has created uncertainty about Commerce’s Florida expansion.
“When he was minding the store, I think that he was very much the one who was calling the shots,” Mr. Kovaleff said.
Taken together, the developments have strengthened BankAtlantic’s hand in its home state, he said. “How could it be anything but positive?”
James Schutz, an analyst at Sterne, Agee & Leach Inc., said he needed to see Toronto-Dominion’s plans for Commerce before he could determine the impact on BankAtlantic. “Are they going to still keep the same operating template that Commerce had, or are they going to take those branches and make them more like the rest of their branches in the United States? And I think that’s the big question.”
Toronto-Dominion says it has no near term plans to alter Commerce’s business model.
“It’s truly business as usual for both sides,” said Neil Parmenter, a spokesman for Toronto-Dominion. “Our message all along to Commerce has been ‘Just keep doing what you are doing, and don’t stop things. Don’t change things. Just keep on being Commerce.’ ”
Alan B. Levan, BankAtlantic chairman and chief executive, did not return calls seeking comment for this article.
But Matthew Kelley, an analyst with Sterne, Agee & Leach, said he did not expect Toronto-Dominion to make any radical changes to Commerce’s strategy.
Toronto-Dominion is “buying a unique strategy and a very successful model in the retail and consumer space,” Mr. Kelley said. “So if you start tinkering with it, or even going to the extent of integrating the existing [Toronto-Dominion] model, I think you are really diluting the asset that you have purchased.”
