Shares of Wells Fargo & Co. surged Friday as investors placed weekend bets on another super-size bank merger.
Though there seemed little basis for the activity, bank merger speculation at the end of the stock market's week has become a near ritual, as many recent major deals have been unveiled on Mondays.
Wells was the focus of investors last week, with its share price rising $18.75, or 5.1%, to $387.25 on Friday. The previous week Fleet Financial Group was the center of attention.
But rather than conferring with lawyers and investment bankers on Friday, four senior Wells exec-utives-chief financial officer Rodney L. Jacobs, vice chairmen Clyde W. Ostler and Paul M. Watson, and executive vice president Dudley M. Nigg-were meeting with analyst Joseph K. Morford of Van Kasper & Co., San Francisco.
"They seemed more upbeat than any time since the First Interstate merger," Mr. Morford said. "They're stepping up marketing to say Wells is back."
Wells has been rumored for weeks to be a takeover target. Because bank managements have become far better at maintaining dealmaking secrecy, market players seemed more inclined to buy on rumors.
Investors have learned there is relatively little risk in buying stock on Fridays on the outside possibility of reaping a big premium should a sale be announced Monday before the stock market opens.
"You are getting a lot more movement on Fridays in this era of consolidation," said Michael L. Mayo, bank analyst at Credit Suisse First Boston.
The extra activity has also meant that the Friday moves in a company's shares are now a less reliable sign than they once were that a deal is near. For instance, PaineWebber Group's stock shot up 17% on Feb. 27, mostly in the last five minutes of trading. But the brokerage firm has not yet sold to a bank or anyone else.
And the market missed the three biggest deals in banking history.
Citicorp's stock rose only 6.25 cents on the last day of trading before the merger deal with Travelers Group was announced. Shares of NationsBank Corp., BankAmerica Corp., First Chicago NBD Corp., and Banc One Corp. also reflected little sentiment that their major mergers were in the works.
Meanwhile, bank executives and investment bankers believe that last- minute investors could be increasingly disappointed by premiums they get on Monday-morning deals.
Recent blockbuster bank mergers have been "mergers of equals," meaning shareholders will receive little premium over the market price of their stocks when the companies combine.
As bank deals become ever larger, some executives believe investors will have to learn to live without big premiums.
"I think a merger of equals is an attractive way to do a deal," said Fleet Financial chairman and chief executive Terrence Murray last week at a banking conference, adding, "It may be the only way to get some of these big deals done."
One of many rumors winding through the market lately has Fleet pursuing a merger of equals with PNC Bank Corp. or even BankBoston Corp., though a Fleet-BankBoston transaction would have serious antitrust problems, bank lawyers say.
Even if PNC opts against merging with Fleet, it is unlikely the bank will sit still.
SBC Warburg Dillon Read analyst Anthony R. Davis said growth in the bank's credit card division has been slower than expected. That, combined with the sluggish performance of Summit's stock price, speaks to the logic of such a merger, he said. Mr. Davis upgraded Summit to "outperform," from "neutral," because of the increasing likelihood that it will be snapped up.