BankAmerica Corp. is increasing and extending its stock repurchase program in an ongoing effort to manage excess capital.
The move underscores a flurry of buyback actions by banks and thrift institutions. Besides the San Francisco superregional, six other companies have enhanced their repurchase programs in the past week.
BankAmerica unveiled plans to repurchase an additional $3 billion of its common stock and $1 billion of its preferred stock through the end of 1998.
Since the program began in February 1995, the company has retired 35.16 million common shares valued at $2.4 billion, and announced the future redemption of $1.2 billion of preferred stock.
The action was generally hailed by industry analysts. David Corkins of Janus Capital Corp. said BankAmerica is making "all the right moves" by focusing on costs and buying back excess capital.
The surge in stock repurchase announcements, including moves by Great Western Financial Corp. and Keystone Financial Corp., amounts to a revival of a buyback trend that can be traced to the flood of trust-preferred securities issued since last fall.
Federal Reserve approval of trust-preferred securities as Tier I capital, coupled with a favorable tax treatment, sparked a boom in issuance and opened the way for many banks to buy back more stock.
Indeed, the nation's top 25 banks spent $6 billion buying back shares during the fourth quarter of 1996, up from approximately $3.5 billion in 1995, according to Keefe, Bruyette & Woods Inc.
"This is a really positive sign for the industry," Mr. Corkins said. "I'm glad that banks are waking up to return excess profits to shareholders instead of pouring it down the drain."
Buybacks are popular, noted Richard Cripps of Legg Mason Wood Walker, because they enhance earnings at the same time they reduce excess capital.
But the buyback plan still leaves BankAmerica with enough capital to fund an acquisition. Speculation that the bank would acquire PaineWebber Inc. have circled in the investment community recently and emerged in trading again Tuesday, sending PaineWebber shares up 8% to $38.625. The rumors were denied by both parties.
Meanwhile, in Tuesday market action the Standard & Poor's bank index inched closer to the 500 mark, up 0.8% to 499.16, with investors waiting for news about interest rates from the Fed's monetary policy meeting.
At the same time, the Dow Jones industrial average gained 0.4% to 6833.48 and the small banks in the Nasdaq bank index rose 0.32% to 1352.3. BankAmerica shares rose $1.375 to $114.625.