Independence Community Bancorp's deal to buy Staten Island Bancorp provided further evidence of a New York thrift market ripe for consolidation.
But investors' reaction showed that Wall Street does not view all thrift transactions in the region as equal.
Investors cheered New York Community Bancorp. Inc.'s June 27 announcement that it was buying Roslyn Bancorp Inc. for $1.6 billion. New York Community's shares jumped 7.3%, an unusual development for the buyer in a deal. (It closed on Oct. 27.)
Independence's Nov. 25 announcement of its $1.5 billion deal got a decidedly chillier reception: The Brooklyn company's stock fell as much as 6%.
For one thing, investors said they were confused about Independence's plan to sell the money-losing SIB Mortgage Corp. unit of Staten Island to Lehman Brothers Holdings, which was Independence's banker on the transaction.
On a conference call with investors Tuesday, Independence president and chief executive Alan H. Fishman had said that Independence plans to unload "the bulk" of the SIB Mortgage business, including branch offices and the loan portfolio.
But he gave no concrete numbers and was unclear about what Lehman will pay Independence for the assets. Moreover, other parts of the conference call were conducted in a "sloppy" manner, said Frank J. Barkocy, director of research at Keefe Managers Inc., a fund management company specializing in financials.
In an interview the day the deal was announced Mr. Fishman said Lehman would pay book value for SIB Mortgage, which was $60 million at Sept. 30. But when asked by investors during the call how much Lehman would pay, he said it would be "closer to $1 million than $50 million," indicating that the value of the assets will rapidly deteriorate until the deal closes. Last week Independence was mulling a follow-up conference call to provide more clarity on the sale of SIB Mortgage.
On Wednesday, Mr. Barkocy defended Independence's deal for Staten Island and said people will ultimately realize that the two are a good fit.
Bear Stearns & Co. Inc. analyst Salvatore J. DiMartino downgraded Independence shares to "peer perform" from "outperform" Wednesday. "We like this deal from a strategic standpoint," he wrote, but "the earnings accretion in 2004 is minimal" and Independence is paying "a full price."
Speculation about a wave of consolidation has lifted the share prices of New York-area thrifts for months, and the Independence-Staten Island deal apparently gave them another lift. Shares of Astoria Financial Corp. of Lake Success, N.Y., GreenPoint Financial Corp. jumped Tuesday and continued to rise Wednesday. In recent interviews with American Banker both companies' chief executives said they would consider selling if the price is right, though analysts disagree on whether the two will make deals soon.
Astoria fell 0.61% Friday, GreenPoint fell 1.6%, Independence rose 1.36%, and New York Community rose 0.54%.
And New York Community president and CEO Joseph R. Ficalora said in an interview Wednesday that his company "is clearly an interested, well-positioned buyer within this market" provided prices do not get out of control.
Mr. Barkocy said other prospective buyers could include Washington Mutual Inc., which bought Dime Bancorp. in January 2002. Washington Mutual did not return phone calls at press time.
Analysts have consistently praised New York Community's "disciplined" approach to acquisitions, and the company announced Tuesday that its earnings could benefit more from the Roslyn deal than originally estimated. Mr. Ficalora said that closing the deal several weeks early is giving the combined company more time to work with its balance sheet.
In addition, the bounce of long-term interest rates between the announcement of the acquisition and its completion allowed the merged company to replace lower-yielding securities and mortgage loans with more profitable ones, Mr. Ficalora said. But he said its deposits are still as cheap as before because short-term interest rates remain low.
