The announcement that Brooklyn Bancorp is being acquired is likely to shift investors' attention to New York City thrift institutions.
In this latest deal, Republic New York Corp. said over the weekend that it will acquire Brooklyn, parent of Crossland Savings Bank, for $530 million, or 140% of the thrift's most recent book value.
Wall Street analysts have recently called attention to a series of these thrifts as well-run companies that are likely to be acquired within a few years and yet are undervalued among financial stocks.
Last week, for example, Salvatore J. DiMartino of Advest Inc. raised his 1995 earnings estimate for Queens County Bancorp to $3.40 a share, from $3.25. (See table below.) He has "buy" ratings on Queens County and four other New York-area thrift stocks.
"In our opinion," he said, "these thrifts trade at attractive valuations, have favorable prospects for double-digit earnings growth, will be prime beneficiaries of consolidation and have strong and improving fundamentals, highlighted by loyal deposit bases."
He noted that "within the past 12 months, takeover fever has swept through the area," with a host of thrift deals valued at an average price- to-book ratio of 139% and an average deposit premium of 5.1%.
Besides Queens County, he recommended Astoria Financial Corp., Dime Bancorp, Greater New York Savings Bank, and GreenPoint Financial Corp.
Recently these stocks traded, on average, at less than nine times next year's expected earnings and slightly under 90% of their book value per share, he said.
Also last week, analysts Norman Jaffe and Chad Yonker of Fox-Pitt, Kelton Inc. recommended four metropolitan New York thrifts, saying they expected the region to undergo increasing consolidation of its banking industry.
In addition to Greater New York, they recommended clients buy shares of Haven Bancorp, based in the Woodhaven section of Queens, and two Long Island institutions: TR Financial Corp., Garden City, parent of Roosevelt Savings Bank, and Long Island Bancorp, Melville, parent of Long Island Savings Bank.
The Fox-Pitt analysts said they believed the recent decision of Chemical Banking Corp. and Chase Manhattan Corp. to merge, creating the nation's largest bank, will have a "profound competitive impact" in the New York area.
In response to that deal, they said, other companies in the highly fragmented New York market will likely be driven to enlarge their banking franchises "or face erosion of their long-term profitabiliity."
The traditional thrift organizations, Mr. Jaffe and Mr. Yonker noted, are "rich with low-cost core deposits," some with over $100 million in deposits per branch. But they face "hitting the revenue wall" unless they make large investments in technology, diversify themselves, or lower their loan underwriting standards.
At the same time, many of these formerly mutual-style thrifts remain overcapitalized after public stock offerings of recent years. Shareholders are urging that returns be improved and managements are eager to sell while conditions are good.
Mr. DiMartino noted that, as of the first quarter this year, New York State publicly traded thrifts reached record levels of operating performance.