Shawmut Rises on Report Of BankAmerica Interest
Shares in Bank of Boston Corp. and Shawmut National Corp. diverged Friday following a report that BankAmerica Corp. is holding merger discussions with Shawmut.
The two New England companies have had parallel rises in recent weeks as takeover frenzy gripped the banking industry. Shawmut, based in Hartford, Conn., continued its rise Friday, climbing 75 cents to $10.375.
But Bank of Boston dropped 50 cents to $11.25 on the report, which appeared in The Wall Street Journal. Any talks with BankAmerica could throw a wrench into Bank of Boston's months-long courtship of Shawmut, analysts said.
BankAmerica Stock Slumps
Meanwhile, BankAmerica's stock slipped 37.5 cents to $41.875, in what was a generally declining market.
"I'm sure BankAmerica is Shawmut's preference" over Bank of Boston, Michael Plodwick, an analyst with C.J. Lawrence, Morgan Grenfell. If BankAmerica and Shawmut are talking, "it's more a sense of getting to know each other," he suggested.
All three companies declined to comment on the report.
Another acquisition by San Francisco-based BankAmerica would be an aggressive move after the announcement last Monday that it would merge with Security Pacific Corp., Los Angeles. Many observers said the addition of shawmut, which has $22.7 billion in assets and is struggling under the weight of bad loans, could create indigestion for the company.
"They would be doubling their asset size virtually overnight" if Security Pacific and Shawmut were both added, said Charles Peabody, an analyst for Kidder, Peabody & Co. in New York. "That's a hell of a lot of assets to manage."
Bad Assets Improve
Shawmut has $1.71 billion in nonperforming assets but showed a slight improvement in that category in the second quarter, when it posted a loss of $58.7 million. The banking company has been searching for ways to shore up its capital.
Disappointing numbers did not deter BankAmerica from going after Security Pacific, which may explain some of the optimism on the part of Shawmut shareholders.
Shawmut's stock has been climbing since July, when some analysts were heartened by a narrower second-quarter loss than anticipated. The takeover frenzy touched off by Chemical Banking Corp.'s pact with Manufacturers Hanover Corp. and NCNB Corp.'s combination with C&S/Sovran Corp. has also helped push Shawmut's stock above the $6 level, where it had languished for months.
BankAmerica's burning desire for an East Coast franchise became apparent early this year, when it lost the derby for Bank of New England to Fleet/Norstar Financial Group Inc. With a virtual lock on the West Coast, it is believed to be looking east again.
Bank of Boston has reportedly held formal merger discussions with Shawmut, the both companies have been silent on the subject.
PHOTO : Parallelism Ends