For months, bankers have been buzzing excitedly about a coming wave of trans-Atlantic deals. But when one actually happened Monday, the stock market shrugged it off as an aberration.
Though domestic merger deals have sent bank stocks soaring, HSBC Holdings' $10.3 billion deal for Republic New York Corp. barely registered a blip.
Bank stocks were mixed on the news. The Standard & Poor's bank index fell 0.93% and the Dow Jones industrial average 0.22%, to 11,007.3.
"This deal made a splash, but there were no ripples," said Stephen Biggar, a bank analyst at Standard & Poor's Corp. "Merger announcements can stimulate bank stocks, but this deal did not because it was a special case."
Analysts and other experts said the Republic deal, Deutsche Bank's deal for Bankers Trust Corp., and a handful of other recent transactions here by foreign banks will prove to be the exceptions to the rule. "It is still difficult for a foreign bank to buy a U.S. bank," said Charles Nathan, a partner at Fried Frank Harris Shriver & Jacobson. "It's hard to make the numbers work."
Foreign banks that opt for cash deals must raise big chunks of capital to pay for usually high-priced U.S. bank shares, or they can put together a complicated deal using their American depositary receipts to pay off shareholders in the U.S. bank.
And the track record of foreign banks buying U.S. banks is questionable, Mr. Nathan said. "Foreign banks have done abysmally when buying U.S. banks. And for those that have had some success, it isn't anything to write home about."
HSBC's acquisition of Marine Midland was viewed as unsuccessful, and Bank of Ireland's acquisition of First New Hampshire in the late 1980s was a "disaster," the banking attorney said.
HSBC's deal for Republic is part of the London-based buyer's banking strategy, said Charles L. Coltman, the head of global corporate banking at First Union Corp. "In other words, this deal is a special circumstance as opposed to a precursor to a lot of large cross-border transactions."
Few U.S. banks are similar to Republic, which already had a link to Europe through its 49% stake in Safra Holdings. And few have private banking subsidiaries comparable to Republic's.
"Republic was an unusual animal," said Nancy Bush, a bank analyst at Ryan, Beck & Co. in Livingston, N.J.
Foreign banks that already have a position in the United States are likely to continue expansion with smaller deals, Mr. Biggar said. But it is unlikely the Republic deal will set a precedent for major purchases or that other foreign banks will rush to snap up U.S. banks, the analyst said.
"U.S. banks are cutting back on their exposure in foreign markets. And although U.S. banks are always looking for revenue growth opportunities, the effect of the third quarter is still fresh in their minds," he said, referring to last year's meltdown in emerging markets.
But some said it is just a matter of time before another cross-border deal is announced.
"I definitely can see foreign banks buying up U.S. banks," said Ed Furash, a consultant who has covered the banking industry for 40 years. "All bets are off, and most banks are up for grabs. And the bank to go will, of course, be the one that slips up."
Meanwhile, shares of MBNA Corp. surged 5.17% after Salomon Smith Barney upgraded the company to "buy," from "outperform," because of the credit card company's improving business operations. Analyst William Ryan also raised his earnings-per-share estimates for 1999 and 2000 to $1.20 and $1.40, respectively.
MBNA's stock rose $1.3125, to $26.6875.