Deutsche Bank AG's deal for Bankers Trust appeared to help some midsize U.S. banks withstand a broad market selloff on Monday, as investors bought shares of other U.S. banks seen as potential takeover targets for European banks.
Such regionals as Mellon Bank Corp. and Mercantile Bancshares Corp. of Baltimore showed modest gains, while other bank stocks dropped $2 a share or more.
"If they're a takeover candidate, they're flat or up a bit at best, while other banks are off considerably," said Philip Orlando, chief investment officer with Value Line Asset Management.
Mellon, with widespread investment management operations that could appeal to a European operation, added 6.25 cents, to $63.1875. Mercantile, with a solid retail presence, was up 12.5 cents, to $35.125.
But shares of J.P. Morgan & Co., whose private banking operations could have appeal to an overseas suitor, fell sharply, $4.5625, to $106.875.
For the most part, the $10.1 billion deal for Bankers Trust "is having very limited impact," Mr. Orlando said.
The calm was a contrast from the reaction to other recent merger agreements by U.S. banks that sent financial institution shares soaring.
Bank shares did rally last week, when Bankers Trust and Deutsche Bank acknowledged they were near an agreement. But most industry observers do not expect an immediate push by European banks to mimic Deutsche Bank my making cash deals for U.S. institutions.
European banks may have missed their opportunity, said Carla D'Arista, banking analyst at Friedman, Billings & Ramsey. U.S. bank shares have become more expensive in the 1990s, she noted, and now currency issues stand in the way of dealmaking.
Still, "the Federal Reserve Board is clearly looking toward a deregulated environment in terms of approving these mergers," Ms. D'Arista said.
Investment bankers were subdued on the news. They said that Deutsche Bank's agreement to buy Bankers Trust might force the handful of European banks with global ambitions to act sooner than expected, but that they doubted the deal will trigger another wave of mergers.
In February 1995 National Australia Bank Ltd. revived the bank merger environment when it agreed to acquire Michigan National Corp. But "I don't think the floodgates will open this time like they did then," said James J. McDermott, chairman of Keefe, Bruyette & Woods Inc. "You're dealing with a smaller universe."
So far the results have been mixed when European banking giants chose to buy into U.S. operations, and that could be another disincentive, analysts said.
Indeed, seemingly for every success, such as ABN Amro's operation of LaSalle National Bank in Chicago and EAB in New York, there has been a failure, such as National Westminster PLC pulling out of operations in the Northeast.
In Monday trading, profit taking from last week's run-up ruled, with Citigroup falling $2.6875, to $50.1875; Chase Manhattan Corp. $2, to $63.4375; and $2.375, to $87.3125.
The Standard & Poor's bank index was down 2.91% and the Dow Jones industrial average 2.32%.