Society Corp. in Cleveland Emerges from Rivals' Shade

While National City Corp.'s pursuit of Ameritrust is the hot topic in Cleveland banking circles these days, a local competitor, Society Corp., is quietly winning a few followers of its own.

When people mention top regional banks, "they think of Wachovia and NBD, and they don't think of Society, but they should," said Michael Plodwick, an analyst at C.J. Lawrence Inc.

Price Appreciation Foreseen

Mr. Plodwick said he expects Society's stock, which traded at $44 a share late Friday, to reach $55 by yearend.

Although a union between Ameritrust Corp. and National City Corp. would dwarf Society's $15 billion in assets, Mr. Plodwick and others claimed that Society could actually pick up loans and deposits in the post-deal confusion and from antitrust-related divestitures.

They concede that such a deal would make Society a smaller player relative to National City, but they also say Society would remain big enough to be competitive.

"I've got to believe that Society is better off competing with one bank, even if it's bigger, than being equal among three," said Mark Lynch, an analyst at Bear, Stearns & Co. Thursday, he raised his earnings estimate and boosted his rating on Society from "hold" to "buy".

Earnings Exceed Forecast

Meanwhile, first-half earnings in excess of Mr. Plodwick's expectations have confirmed his bullish view, which stems also from evidence that Society can improve earnings in a tough economic environment.

The C.J. Lawrence analyst cited improved interest margins, small increases in nonperforming loans, and high reserves as indicators that the company is "among the most attractive of any company we follow."

Furthermore, he said, the company this year has demonstrated it can improve its performance without the tax credits that were available last year. Society got the credits in 1989 when it bought Trustcorp.

The bank reported earnings of $82.8 million, or $2.51 a share, for the first half of 1991, more than most analysts expected. Net interest margin improved to 5.10% in the second quarter, from 4.94%, and nonperforming assets rose only 1.8%, to 2.2% of total loans.

Competitive Dangers?

But some market observers have expressed concern about Society's competitive position in Cleveland if National City Corp. wins Ameritrust.

And not everyone is as high on Society as Mr. Lynch or Mr. Plodwick, however.

Thomas Brown, an analyst at Donaldson, Lufkin & Jenrette Inc., said Society isn't a bad stock and will outperform the overall market this year, but he added that he believes others will appreciate more.

The company's loans are shrinking, Mr. Brown said, and at least relative to Wachovia, its expense control is unimpressive. Wachovia was fifth in expense control last year; Society, 47th.

Barnett Seen as Better Choice

"Do you want to own Society at 7.5 times earnings or Barnett at 8 times earnings?" Mr. Brown asked. Although Barnett currently has a higher level of non-performing loans, he said, as the dominant bank in a growing market its long-term growth and profitability prospects are better than Society's.

Mr. Brown has rated Society a "hold" but thinks its share price will rise to $48 this year. "We are bullish on bank stocks as a group," he said, "but don't expect Society to be in the top quartile."

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