Hibernia Corp. and First American Corp. could be targets this year for banks wanting to get one last pooling-of-interests deal under their belt, an analyst says.
Both Hibernia, New Orleans, and First American, Nashville, are considered trophy franchises with minimal takeover premiums in their stock, said Sean J. Ryan of Bear, Stearns Co., New York.
Therefore, the two companies are ideally suited to be bought out, he said, and buyers would likely use the pooling approach.
Later this year changes in accounting rules are expected to make it effectively impossible for acquiring companies to continue pooling-style mergers.
"We expect the immediate impact of the change to be a rush of mergers as banks seek to get one last pooling in under the wire," Mr. Ryan said.
Under the pooling method, the merging companies' balance sheets are combined, or pooled, as if they had never been separate. Banks have long favored the pooling method since it is easier to sell deals to their shareholders when the acquisition premium being paid need not be deducted over time from earnings.
After the accounting rule change, banks would have to structure their deals as purchases, where the price paid above the company's net worth- goodwill-must be deducted from the buyer's reported earnings per share for many years.
First American shares were up 43.75 cents, to $41.3125 on Thursday, while Hibernia rose 50 cents, to $16.75
The activity came as banks were regaining some ground lost over the past few days.
The Standard & Poor's bank index added 3.54% and the Dow Jones industrial 2.03%. The Nasdaq bank index gained 1.94% and the S&P 500 2.49%.
Citigroup rose $1.25, to $53.625; Chase Manhattan Corp. $3.0625, to $76.125; and J.P. Morgan & Co. $2.375, to $106.1875.
Among thrifts, Astoria Financial Corp. was up Golden State Bancorp was up 31.25 cents, to $17.1875; Dime Bancorp $1.125, to $25.1875; and Washington Mutual 12.5 cents, to $41.125
Shares of SunTrust Banks Inc. were up $1.9375, to $66.875 following a reiterated "buy" recommendation by Frank J. Barkocy, a banking analyst at Josephthal & Co., New York.
Shares had been sharply sold off in recent month as investors continue to worry about SunTrust's pricey merger with Virginia's Crestar Financial Corp.
Mr. Barkocy said he is confident that the integration of the two banks will be successful.
"The Crestar acquisition is consistent with SunTrust's philosophy that calls for acquisitions to be accretive to earnings per share," Mr. Barkocy said.
The acquisition also is in keeping with SunTrust's desire to purchase "quality organizations with leading market positions, that have proven management, and operate in strong, growing markets," Mr. Barkocy said.
Among smaller-cap issues, shares of First International Bancorp in Hartford, Conn., gained 25 cents, to $11, following a downgrade to "attractive" from "buy" by analyst Kevin Spinner at Keefe, Bruyette & Woods Inc.
Mr. Spinner said his move was based on price appreciation in recent weeks.