Mellon Bank Corp. shares shot up 4.8% Wednesday on rumors that Chase Manhattan Corp. was about to make a "white knight" bid for the Pittsburgh banking company.
Mellon's stock rose as high as $74 before closing the day at $73.25, up $3.375. Much of the rise came in the last hour of trading.
Sources close to Mellon and Chase dismissed the rumors. A source at Mellon said senior-level staff were not under orders to stay late at work in anticipation of a merger announcement, and a person close to Chase said the bank "really has no interest in Mellon."
The merger-hungry market evidently thinks otherwise. Mellon is fending off an unfriendly takeover bid from Bank of New York Co., and Chase is thought to be on the prowl to build up its investment banking and asset management businesses. Mellon, which has one of the largest asset management operations of any banking company, would solve at least part of that puzzle.
The runup in Mellon's stock came despite a general decline in bank stocks. In fact, banks helped pull the market down for a third straight day as concerns about Asia and interest rates sent investors scurrying.
Shares opened lower on a Japanese official's comments that the economic outlook there was poor and that more of the country's banks may fail.
The market also reacted to news that Federal Reserve chairman Alan Greenspan met Wednesday with President Clinton and Treasury Secretary Robert Rubin to discuss the economy.
Although no definite conclusions could be drawn, Mr. Greenspan has made a habit of telegraphing his thinking to other top-level officials when rates are headed higher, said Scott J. Brown, an economist at Raymond James & Associates.
BankAmerica Corp. fell $2.25, to $82.625; Chase Manhattan Corp. dropped $2, to $135; and Citicorp lost $1.6875, to $148.
For the day, the Standard & Poor's bank index was off 1.64% and the Dow Jones industrial average fell 1.02%. The Nasdaq bank index dipped 0.95%, and the S&P 500 shed 0.95%.
J.P. Morgan & Co. fell $1.6875, to $132.875, despite a positive response to growth targets that management discussed with analysts late Tuesday.
"Barring a sustained market downturn, J.P. Morgan can deliver on its pledge to get returns on equity into the 15% to 20% range, and do so quickly," said Judah S. Kraushaar, a banking analyst at Merrill Lynch & Co.
Shares of Regions Financial Corp. rose 62.5 cents, to $43.1875, after a presentation to analysts in Birmingham, Ala.
Despite some raised eyebrows over the absence of Regions chairman and chief executive J. Stanley Mackin, said to be in Italy, analysts came away with generally positive assessments.
Company executives described initiatives to improve the bank's sales focus, upgrade technology, and use its roots as a community bank to generate more revenue.
Also, "growth in fees should remain robust," helped by mortgage, leasing, cash management, trust, cards, and investments, said Michael Mayo, a banking analyst at Credit Suisse First Boston.
Another southern company, First Tennessee Corp., is being unfairly pounded over rate fears, said Sean J. Ryan, a banking analyst at Bear, Stearns & Co.
The company does have large bond and mortgage operations, both vulnerable to rate swings, but it has taken steps to effectively hedge against the risks, Mr. Ryan said.
Shares of First Tennessee rose 18.75 cents, to $33.625.