Shares of Advanta Corp. rose dramatically on Wednesday as rumors of an imminent takeover swept the market.
Meanwhile, shares of American Express Co. continued to rise as rumors of a buyout by Citicorp, reignited last Friday, got hotter.
Indeed, one source said an agreement between the two titans could be inked within days.
Another observer, Michael Auriemma, president of Auriemma Consulting Group, agreed that a deal was in the making. "It's very real," Mr. Auriemma said, calling American Express and Citicorp "a great pairing."
Doubters say hurdles like Visa's and MasterCard's rule forbidding members from issuing American Express cards make the rumors implausible. Citicorp is the largest issuer of bank credit cards.
But Mr. Auriemma said the deal could "change the rules for the entire industry."
American Express ended the day with a gain of $1.50 at $77.125, while Citicorp dropped 25 cents, to $120.75.
News of declining delinquencies helped card stocks in general. According to the American Bankers Association, late card payments, while still historically high, declined to 3.51% in the first quarter from 3.73% in the fourth quarter of 1996.
Leading the way Wednesday was Advanta, the Springhouse, Pa.-based credit card issuer.The beleaguered card issuer's class A stock ended the day at $34.625, up $2.75, or 8.63%. Its class B stock rose $3.062, or 10.23%, to $33.
Sources said Advanta has amassed a list of supposed suitors. BankAmerica Corp., Household International, Associates First National, GE Capital Corp., and Australia National Bank are among the rumored buyers.
The monoline card issuer fueled takeover rumors in March when it retained B.T. Wolfensohn, the investment bank, to explore its alternatives after its stock plunged. The price was halved when Advanta announced a $20 million loss in the first quarter, which it attributed to poor credit quality.
James Accomando, a Fairfield, Conn.-based consultant, said with Advanta "down on its knees," it would be an "excellent bank for a deal." Advanta would not comment on market speculation.
Benefiting from good news on delinquencies, MBNA Corp.'s shares rose 62.5 cents, to $36.125, while Capital One gained $1.50, to end the day at $35.25.
Bank stocks overall managed to stage a credible performance on Wednesday after negative earnings estimates on some technology stocks pulled down the rest of the market.
The Standard & Poor's bank index inched up 0.34% to 557.36, once again outperforming the general market. The composite index for the Nasdaq market, where most technology issues and many small banks are found, fell 0.74%, to 1,432.4. The S&P 500, the best-known broad market stock index, dropped 0.60% to 889, while the blue-chip Dow Jones industrial average dropped 42.06 points, a 0.54% loss, to 7,718.71.
Analyst Frank J. Barkocy of Josephthal Lyon & Ross Inc. termed Wednesday's market soft, but asserted that prospects for bank stocks still "look awfully good."
Mr. Barkocy said declining credit card delinquencies, progress on the banking reform bill, and industry earnings of $14.5 billion for the first quarter make bank stocks "a good place to be."
First Union Corp., up $1.125 on the day, to $95.375, announced a 2-for-1 stock split, effective July 31. Its dividend will rise from 58 cents a share to 64 cents, payable Sept. 15.
The stock received a new "buy" rating from Dillon Read & Co., which has reintroduced bank coverage under analyst Anthony Davis. He said the performance of First Union's capital markets group has pulled up earnings.
Mr. Davis also rated BB&T Corp. a buy. He called the Southern bank "a well-kept secret" and expects stock price to rise from $45.125 to $53 over the next 12 months.
Bank of America's previously announced 2-for-1 stock split is effective today The stock rose $1 in trading on Wednesday to close at $134.75.
