Plans for a three-for-two stock split and an 11.3% increase in the dividend appear to have revived interest in Old Kent Financial Corp.

The Grand Rapids, Mich., company announced the moves Monday. By Tuesday's close, shares in the $9 billion-asset company had gained $1, reaching $41.375, on volume of 169,600 shares, well above average.

"We wanted to make the stock available to a broader audience," said Richard W. Wroten, chief financial officer.

He said some retail investors were put off by Old Kent's share price. After an 18-month rally, the stock reached the $40 range before stalling in the first quarter.

An Earlier Split

That was about the same price level as in 1986, when Old Kent's last three-for-two split took effect, Mr. Wroten added.

The latest split is payable Sept. 15 to stockholders of record of Aug. 28.

The board authorized a quarterly dividend of 23 cents a share after the split takes effect, compared to 31 cents before the split.

On a pre-split basis, the new dividend is equivalent to 34.5 cents a share.

Analyst said the stock may have received a needed boost from the announcement.

Old Kent stock trades at or slightly below the average for midwestern regional banking companies, despite better-than-average performance, said Ken Puglisi, an analyst for Chicago Corp.

Ratio Are Similar

Old Kent's 11.1 price-earnings ratio was just shy of the 11.6 average of other midwestern banks, and its price-to-book multiple of 1.65 was also a few basis points off the average, Mr. Puglisi said.

Old Kent's yearend risk-based capital ratio of 13.36% was the highest among the six Michigan banks with assets greater than $5 billion, according to Fitch Investors Service.

Its 1.11% return on assets was only one basis point behind that of Comerica Inc., which led the group. Old Kent's net interest margin of 4.47% was third in the Michigan group behind Comerica and First of America Bank Corp.

After a surge in January, however, Old Kent's share price has risen only moderately, despite better-than-expected earnings of 89 cents a share in the first quarter.

Return Is Strong

The earnings represented a healthy 1.13% return on assets and a 14.8% return on equity, Mr. Puglisi said.

At first glance, nonperforming assets appear somewhat higher than Old Kent's peers, at 2.2% of assets, Mr. Puglisi said.

But the statistic reflected aggressive reserving and writedowns - moves that may indicate a reduced potential for future losses.

Mr. Puglisi said the dividend increase made the stock more attractive.

But though a few more investors may be able to buy the stock, Mr. Puglisi said the advantage is primarily psychological, as investors wind up with a greater number of shares.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.