Insider buying rose sharply at regional and superregional banks in June and July, a possible sign that bankers expect merger activity to resume.
Insider buying picked up substantially - despite rising share prices - at regionals and superregionals, and activity fell at money-centers in June and July said Robert Gabele, president of CDA/Investnet.
Insider purchasing usually occurs when stocks become cheaper, said Mr. Gabele, who tracks the practice at more than 12,000 companies.
However, "when share prices are (flat) and insider buying surfaces, that is a clue that something has changed or shifted in the industry or economy," he said. "It usually is something positive - somebody could possibly think consolidation."
Indeed, strong insider buying occurred at Boatmen's two to three months before it announced its acquisition by NationsBank Corp.
In June, William Stiritz, chairman of Ralston Purina, who serves on Boatmen's board, bought 30,000 shares at $40 to $40.13, which increased his stake in the company by 700%. Another director, William Maritz, bought 18,000 shares at $40.13 in July, increasing his stake by 158%
Darrell Knudson, chairman of Boatmen's Bank of Kansas, acquired 15,000 shares at $28.44 by exercising his options May 28. And Samuel Hayes, president of Boatmen's Bancshares, bought 1,228 shares at $19.13 by exercising his options in June.
The Boatmen's board decided to seek a merger Aug. 13. The deal at $55.54 a share, was announced Aug. 30.
Analysts dismissed the idea that Boatmen's executives bought shares with prior knowledge of the merger but said takeover speculation could inspire insider purchases.
"Insider buyers have an increasing amount of confidence in the earnings outlook and the ability to earn a return on shareholder value," said analyst Matthew Finn of Burns, Pauli & Mahoney. "Although at the time, they don't have knowledge of the impending sale of the bank, they may be expressing their optimism that such as sale will take place."
Other analysts said the proximity of the buying and the merger could attract the attention of the Securities and Exchange Commission.
"There is nothing abnormal about it because there are people who buy shares every three months. But I suspect that they (NationsBank/Boatmen's) will be reviewed," said analyst John Moore of Morgan Keegan.
NationsBank officials said during the announcement on Friday that insider trading had been investigated by outside counsel, Mr. Finn pointed out. NationsBank and the SEC both declined to comment.
Insider purchasing rose in June and July at PNC Bank Corp. in Pittsburgh; Trans Financial Bancorp in Bowling Green, Ky.; Sovereign Bancorp in Wyomissing, Pa.; National City Corp., Cleveland; Trustmark Corp., Jackson, Miss.; Whitney Holding Corp., New Orleans; and Roosevelt Financial Group Inc., St. Louis..
In trading Tuesday, bank stocks fell with the market early, in reaction to a Wall Street Journal article that said the Federal Reserve Board might raise rates by 50 basis points at its next meeting.
Shares rebounded when the National Association of Purchasing Managers reported that a rise in its manufacturing index was less than expected for August.
Among the biggest gainers for the day were Comerica Inc., Firstar Corp., Hibernia Corp., and Southern National Corp., which were added to Goldman Sachs & Co.'s recommended list.
"These banks have an attractive upside based on fundamentals and also have attractive franchises for acquirers," said Analyst Jennifer Prehn said.
Comerica shares rose $1 to $49.75. Firstar shares gained 25 cents to $47.50. Hibernia was up 25 cents to $11.25. Southern National was up 12.5 cents to $31.125. Goldman also reiterated its "buy" rating on Signet Bank Corp., which gained 37.5 cents to $24.50.
The NationsBank agreement to buy Boatmen's continued to generate controversy.
Gerard Klauer Mattison reiterated its "buy" rating for NationsBank, Robinson Humphrey Co. downgraded the banking company to "market perform" from "buy."
In heavy trading, NationsBank shares fell $1.125 to $84. Boatmen's dropped 75 cents to $52.50.