Moors & Cabot Inc. initiated coverage Friday for six banking companies with operations in New York and New Jersey.
North Fork Bancorp. Inc. of Melville, N.Y.; M&T Bank Corp. of Buffalo; Popular Inc. of San Juan, Puerto Rico; and Valley National Bancorp of Wayne, N.J., received the Boston brokerage's top rating, "buy," from analyst Thomas Monaco.
Commerce Bancorp Inc. of Cherry Hill, N.J., and Hudson United Bancorp Inc. of Mahwah did not fare so well; Mr. Monaco awarded them a "sell" rating.
Mr. Monaco left his analyst position at Keefe, Bruyette & Woods Inc., where he covered money-center banks, in July. The next month he joined Moors & Cabot, where he covers large-cap and superregional banking companies.
North Fork's success comes from its merger and acquisition strategy, along with its ability to grow organically, he said in an interview Friday. "They do smart deals."
Before this year the $59 billion-asset company had been "dormant on the acquisition front for nearly four years," Mr. Monaco wrote in a research note Friday. It acquired Trust Co. of New Jersey in May for $726 million and GreenPoint Financial Corp. in October for $6.3 billion.
It's typical for North Fork to "underpromise" and "overdeliver," Mr. Monaco said in the interview.
"I would expect the same with the GreenPoint" integration - North Fork will exceed its stated goal of generating $100 million of savings from that deal, he wrote in his note.
Also, North Fork should be able to pick up customers dislocated by recent blockbuster mergers and acquisitions that affected the region, such as J.P. Morgan Chase & Co.'s acquisition of Bank One Corp. in July and Bank of America Corp.'s acquisition of FleetBoston Financial Corp. in April, he wrote.
On Monday, John McDonald, an analyst with Banc of America Securities, also initiated coverage for North Fork with a "buy" rating. In a research note, Mr. McDonald wrote that even though North Fork has "a lot on its plate," with two purchases to integrate and a "learning curve in mortgages," he believes the changes are "manageable."
But Jacqueline Reeves, an analyst with BankAtlantic Bancorp's Ryan Beck & Co., who also has a "buy" rating on North Fork, said that it could face integration challenges with GreenPoint and will eventually have to reassess its mortgage business. "Right now it's working terrifically in terms of being an attractive asset generator, but longer-term, they're going to have to figure out what they are going to do with it. Do they have the scale and breadth needed to compete on a national basis?"
Mr. Monaco does not look on Commerce's share so favorably. "Commerce's balance sheet and earnings are likely to come under considerably more stress than any other bank in our coverage universe," he wrote.
On top of those issues, Commerce revealed last week in its midquarter securities filing that it recently received a subpoena from the Securities and Exchange Commission, which is investigating whether Commerce made campaign contributions to win municipal bond underwriting business.
The $60 billion-asset company had previously acknowledged a investigation into the matter by the SEC and the National Association of Securities Dealers.
Mr. Monaco said Commerce has a laundry list of issues, including weak returns, burdensome expense levels, ineffective interest rate risk management, and corporate governance.
However, Ryan Beck's Ms. Reeves said that despite its recent problems, Commerce still has a viable business model.
"They are more of a growth financial services company, and because they have approached the market from a completely different perspective, I think they changed how other companies do business," she said in an interview Friday.
Commerce has increased its deposits much more quickly than its loans. According to the midquarter update, its deposits have risen 35% since November 2003, while loans have risen 29%. The update did not give a dollar amount for loans or deposits.
In addition, Commerce has had fairly clean credit quality and has not been distracted by large acquisitions, according to Ms. Reeves, who rates the stock "market perform."
Calls to North Fork and Commerce were not returned by press time
Shares of North Fork fell 2.84% Monday, while Commerce fell 0.24%.
