Shares of Bank of New York Co. and Baltimore-based Mercantile Bankshares dropped Tuesday despite announcements that the companies were buying back stock.
Bank of New York said it repurchase up to 18 million of its common shares during the next year. The announcement followed completion of a 30 million-share buyback that was announced in December 1997.
Shares of Bank of New York were off 81.25 cents, to $47.875
Mercantile Bankshares boosted its buyback program by three million shares, to 4.7 million. Shares fell 56.25 cents, to $36.4375.
The actions could signal a resurgence of buyback programs as banks look for ways to deploy excess capital, analysts said. Banks repurchase stock because it reduces the number of shares outstanding and generally raises per-share earnings.
Buybacks, which can also lift a stock's price, are considered a far less risky way of distributing excess capital than acquisitions, said Eric Rothmann, banking analyst at Stevens Inc., Little Rock.
Moving in the opposite direction, SunTrust Banks Inc. filed Tuesday to issue 2.7 million shares of common stock. The offering will raise $191.7 million through the placement of common stock with three institutional investors.
After the filing shares of SunTrust were down $1.9375, to $72.875. The filing priced shares at $71 each.
SunTrust is issuing the stock at below market rates in exchange for an expedited sale with what it eyes as long-term investors, analysts said.
The filing earmarked proceeds for "general corporate purposes," such as refinancing debt, making investments at the banking company level, or pursuing acquisitions.
A spokeswoman also said the transaction is related to some final corporate housekeeping on the eve of the company's planned merger with CoreStates Financial Corp. That deal is structured as a tax-free pooling of interests and required the issuance of new stock to complete, she said.
In another pre-merger move, at the request of the Securities and Exchange Commission, SunTrust last month restated its earnings for 1994 through 1996 by lowering its provision for loan losses.
Of the buyers in the latest transaction, Washington Mutual Investors Fund is to receive 1.677 shares, Investment Company of America, 622,000 and American Mutual Fund, 400,000, the filing stated.
In trading Tuesday, markets were flat for most of the day until a late afternoon selling flurry pushed stocks lower.
The Standard & Poor's bank index lost 1.98% and the Dow Jones industrial average slipped 0.47%. The Nasdaq bank index was off 1.43% and the S&P 500 fell 0.53%
Shares of Wells Fargo & Co. slid by 3% or $1.25 in early trading, a drop that traders attributed to sales by two large institutional holders. Shares ended the day off nearly 5%, or $by 1.8125, to $35.5625.
The merger of Wells Fargo and Norwest Corp. continues to draw cautious views from analysts because of the companies' different cultures and approaches.
"I liked Norwest before the merger," said Stephen Biggar, banking analyst with Standard & Poor's Corp.
"The company had great numbers and diversification." Mr. Biggar now rates the shares a "hold," saying, "There remain a lot of integration issues."