After floundering during its now abandoned takeover bid for Star Banc Corp., shares of Cincinnati's Fifth Third Bancorp are on the rise again.
The stock gained 75 cents on Thursday to close at $43.50, after soaring $1.75 the day before. The gains are all the more impressive since the long rally in bank stocks is sputtering in the generally poor environment for equities.
Analyst said they knew of no specific news fueling the gains, which are coming on above-averaged volume. Bank officials were unavailable for comment.
With strong fee-based income, Fifth Third may be benefiting from increased selectivity among bank investors. Analysts have said that the industry's profit momentum is not sustainable without a revival in loan demand.
The gains appear to contradict arguments made by Star Banc's management in spurning Fifth Third that its rival's shares are overvalued. Fifth Third stock trades at a robust 2.6 times book value. The shares have traded as high as three times book value this year.
"If it were perceived as overvalued, we would most likely have seen some profit-taking the last couple of weeks, rather than buying," said one analyst.
That Fifth Third is an over-the counter issue is also spurring its price rise, analysts said. Shares traded on the National Association of Securities Dealers' National Market System often move by wider margins on less volume than those of banks listed on the New York Stock Exchange.
Fifth Third is not moving with many other banks at the moment "because [the Fifth Third shares] had already experienced downward pressure," said Jeffrey B. Naschek of Salomon Brothers Inc.
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At the same time, the bank has produced strong earnings, and there is heightened awareness of the profits possible in electronic retail banking, where it is a leader.
Attention was drawn to that sector of banking this week by the agreement of four super-regional banks to form a joint venture called Electronic Payment Systems Inc. Fifth Third, which has $8,8 billion in assets, runs the successful Midwest Payment System Inc.
Salomon Brothers rates Fifth Third shares a "hold," though the firm believes the shares will appreciate further. It thinks Fifth Third shares do not have the near-term upside potential of some other issues, however.
Fifth Third shares have closed as high as $50.375 this year and were about $47 just before the offer to Star was made in mid-April.
They fell as low as $41 in mid-June, with Star resisting the buyout offer and with some on Wall Street fearful that Fifth Third would further sweeten its bid. Star's shares closed Thursday at $32.625, down 12.5 cents.
Chemical Banking Corp. was the most active banking issue, falling $1, to $33.875, on volume of 2.4 million shares. Citicorp fell 12.5 cents, to $20.125, also on heavy volume.
Other bank stocks were mixed, as overall weakness continued to hurt the equities markets.