Crutchfield DalhouseAssets $47.7 $8.9 billion billionDeposits $37.0 $7.6 billion billionBranches 940 286ROA * 1.00% 0.81%ROE * 14.75% 13.Enriching Your Life – Rather than Your Lifestyle Crestar shares rose $1.50, to $30, and Signet also gained $1.50, to $38.875.Partners at a Glance First Union DominionHeadquarters Charlotte, Roanoke, N.C. With Dominion bought, Crestar Financial and Signet Banking Corp. ![]() Investment bankers and analysts have long said that Virginia is ripe for consolidation. Some analysts said that Dominion would earn less than that forecast in 1994 and would continue to be dilutive until 1995. In all, First Union expects to cut Dominion's current annual expense base by up to 25%, or $100 million, by 1994. The rise in earnings would come from reductions in the bank's loan-loss provision, in expenses related to foreclosed real estate, and in operating costs. The acquired company is expected to add to earnings per share in 1994, earning $115 million. They said the bad-loan problem has peaked and that Dominion just finished an OCC exam so that surprises in the loan portfolio are unlikely.įirst Union expects Dominion to dilute earnings per share in 1993, when the Virginia company will earn $90 million. in New Mexico, which also had high nonperforming assets.Īnalysts speculated that, in the case of Dominion, another southern banking company may have been interested in bidding against First Union, driving up the price.įirst Union's investor relations officials said the purchase price was reasonable. That's what Boatmen's Bancshares paid for Sunwest Financial Services Inc. Typically, a premium of 1.5 times book value is considered reasonable for a company in the early stage of a turnaround. Johnson, managing director at Sterne, Agree & Leach Inc., an Atlanta-based investment bank. "I think First Union is taking an intelligent gamble, buying into Dominion before it gains significant momentum for a turnaround in assets," said Bradford M. While nonperforming assets have been declining for three quarters, they still equaled 6.4% of assets at June 30, among the highest proportions in the industry.ĭominion operates under an agreement with the Office of the Comptroller of the Currency that stipulates it must raise capital and reduce its level of bad assets. Sour real estate loans have hammered Dominion. The purchase is a gamble by First Union that it can float Dominion out from under a deluge of bad loans. This happened despite the company's announcement that earnings for 1992 would be $480 million to $495 million, much higher than Wall Street had expected. The surprising premium First Union agreed to pay sparked a selloff in its shares, which fell $1 on the day. At First Union's closing price of $37 a share, the deal has a value of $21.45 per Dominion share. "Virginia and Tennessee are the only sizable markets left to First Union," said Richard Brown, head of the financial institutions group at Bankers Trust New York Corp., which advised First Union.īy terms of the agreement, each of Dominion's 38.7 million shares will be exchanged for 0.58 share of First Union. The company also has 71 branches in Tennessee, where First Union had one branch and wanted to expand. Most of its branches are in Virginia, where a growing population and diverse industry make for potentiality profitable banking. Including Meritor and Dominion First Union would have a 10% deposit share in Virginia, fourth-largest in the state, Analysts speculated that First Union would try to buy another Virginia bank to better compete in the state against rival NationsBank Corp.ĭominion has $8.9 billion in assets an 286 offices, along with sizable mortgage servicing and trust business. "Dominion is a nice franchise, but it isn't a major market force," said Thomas Brown, an analyst at Donaldson, Lufkin & Jenrette Securities Corp. ![]() However, analysts said they think First Union may need to make other acquisitions in the state to become a major force. Last week, First Union announced plans to buy Meritor Savings, which also has offices in Virginia. Still, analysts said the acquisition is important because Virginia is one of the only southern states left for Charlotte, N.C.
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