National City Corp.'s proposed acquisition of Integra Financial Corp. is one deal that hasn't received a ringing endorsement from investors.
Shares in the Cleveland-based buyer fell by $1.125, or 4%, on Monday, even as the American Banker index of the nation's 225 largest publicly traded banks was rising 2.3%. Shares fell an additional 62.5 cents on Tuesday to $29.875.
Wall Street banking analysts blamed the weakness on investor doubts that National City's buying Integra would add much to earnings, together with disappointment that the Ohio bank is not itself being sold.
"We don't see much upside potential right now," said Fred A. Cummings of McDonald & Company Securities, Cleveland, who cut his investment rating on the stock to "hold" from "buy" after the $2.1 billion deal for the Pittsburgh bank was unveiled Monday.
Frank J. Barkocy of Advest Inc. noted that "some in the market had expected National City to be bought with $35 billion in assets. With $50 billion in assets after this deal, (a sale) is going to be much less likely."
Mr. Cummings said he liked the Integra deal strategically. "It's a logical move for National City," he said. "The problem is that in 1997, even after cost savings, you aren't looking at a significant level of earnings accretion."
Indeed, he said, the real payday for this deal may be three or four years away. That is beyond the investment horizon of many potential shareholders.
"There is some question in the market that the price paid for Integra might be on the high side," said Mr. Barkocy. The purchase price is 196% of Integra's book value per share.
"I would say it's a fair price," he said. "You do have to pay up a bit for quality and the dilution here is not too onerous.
"This is a good fit," he said. "It's a natural extension into markets in western Pennsylvania that are very similar to the markets where they (National City) now operate."
Mr. Barkocy expects the stock to "run in place for a while" before beginning to build some momentum again late this year.
Mr. Cummings expects the stock, which has traded as high as $31.75 over the past year, to tread water for the next six to nine months, occupying a narrow price range from $31 to $33 per share.
S.G. Warburg & Co. analyst Paul Sowell, who has a "rseduce" rating on the stock, was less optimistic.
He expects National City to buy more banks and thus not be able to buy back as many shares as it recently has. Buybacks have significantly helped earnings per share results and boosted the stock price, he said.
"I don't see that Integra advances National City's (earnings per share) growth rate," he said. "It's a well managed bank, but it's also a slow- growing franchise."
Mr. Sowell expects National City to earn $3 per share this year and $3.15 next year on an adjusted basis. His preliminary forecast for 1997 is $3.50 per share.
