Shares of Sanchez Computer Associates Inc. are soaring on word of a potentially far-reaching software deal with Citicorp.
Neither Sanchez, a provider of core banking software, nor Citicorp is commenting publicly on the pending deal, but the investment community calls it one of Wall Street's worst-kept secrets.
In the last month of trading, Sanchez shares have appreciated over 30% and were trading at $30 late Friday.
Since April, when the Malvern, Pa.-based company landed a contract with Citibank Canada, Sanchez stock has risen 540%.
"It seems like Sanchez is finally getting to a stage where it might be recognized as a prominent player in the bank technology sector," said Charles Wittman, analyst at Wheat First Butcher Singer, Richmond, Va. "The company has definitely had some strong momentum."
Sanchez's main product is Profile/Anyware, a multicurrency, core banking software system that processes loan, deposit, and other basic banking transactions. Sanchez counts as competitors Alltel Corp., Fiserv Inc., Marshall & Ilsley Corp., and Computer Sciences Corp.
Observers said the multicurrency features of the software would appeal to Citicorp because of the bank's extensive global retail presence.
The bulk of Sanchez's contracts have been signed with overseas banks. The company has focused on the international market because foreign financial institutions-particularly those in Eastern Europe and the Far East-have tended to be in greater need of new technology than U.S. banks.
Sanchez recently sold Profile/Anyware to Kredyt Bank PBI SA in Poland. The contract, which extends over six years, is valued at more than $15 million.
Lately, however, Sanchez has trained its sights on North America, where an increasing number of institutions are in need of core banking overhauls, Mr. Wittman said.
He estimated that the U.S. core banking software market could be worth as much as $700 million per year.
"I think there is a great opportunity for Sanchez in the domestic market," Mr. Wittman said. "They have demonstrated their ability with large banks in Europe."
Sanchez had revenues of $19 million in the first nine months of 1997- about 65% of which came from Europe. About 30% hailed from North American banks and 5% from those in the Far East, according to Michael Sanchez, chairman of the company.
One of Sanchez's showcase efforts will be its installation at the Dutch ING Groep, which is standardizing on Profile/Anyware.
Mr. Sanchez said such standardization programs will drive much of his company's future business.
"There is a lot of pressure on banks to consolidate their platforms and save money," Mr. Sanchez said.
He also said his software's ability to handle real-time data base updates will appeal to banks with expanding numbers of delivery channels.
"With things like Internet banking, you really have to be cost competitive," he said. u