Takeover talk is heating up again among bank investors.

On Thursday, shares of Republic New York Corp. and Compass Bancshares surged as investors speculated that the companies were up for sale.

Shares of Republic gained as much as 7%, and Compass shares rose 6.7%, considerably more sharply than most bank stocks. Both companies declined to comment on the speculation.

Analysts suggested that investors may increasingly look for mergers if bank stocks continue to underperform the market. Since the beginning of the year, the Standard & Poor's bank index has gained only 3.3%, versus 7.4% for the S&P 500.

"Bank stocks have been acting pretty poorly, which is enough to get people talking," said Marni Pont O'Doherty, bank analyst at Keefe, Bruyette & Woods Inc.

"Investors are hungering for more deals," said Eric E. Rothmann, bank analyst at Stephens Inc. "There have been fewer deals in 1998 and 1999 than there were in 1997 and 1996."

Takeover rumors have swirled around the $7.2 billion-asset Republic for the past year. But the speculation has become more fervent recently because of the company's languishing stock price. The stock is down 38.75% from its high of $72.50 on April 15, 1998. It rose $3.6875, to $52.25, on Thursday.

Volatility in the company's call options-often a sign that investors believe a sale is in the works-was extremely high, said Paul Foster, banking analyst at financial strategy firm 1010street.com.

"Investors are questioning whether Republic is big enough to stand on its own," said Mr. Foster. "Investors are interested in thriving survivors."

But some analysts are skeptical of the talk.

"It is our understanding that the bank is not up for sale," said Gerard Cassidy, bank analyst at Tucker Anthony. "You should never say never, but I would be surprised."

He and others said they found the speculation about Compass more plausible. Amsouth Bancorp has long been mentioned as a possible buyer; both companies are based in Birmingham, Ala.

"If there is any rumor that I am likely to believe, it would be this one, because the combination would be so compelling," Mr. Cassidy said. Amsouth officials could not be reached to comment.

Compass shares rose $1.3125, to $26.50, on Thursday.

Many analysts are predicting that merger activity will take off in the second quarter.

"By that time, banks will be over the hump with year-2000," Mr. Cassidy said.

He added that many banks believe that pooling-of-interest accounting, which makes bank mergers easier, may soon be prohibited. "So if they are going to merge they need to start announcing now."

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