MNC Financial Inc., on the eve of a much-awaited dividend announcement, traded up sharply yesterday as the Baltimore banking company continued its weeklong ride on a Wall Street seesaw.
The company, parent of Maryland National Bank and American Security Bank, was the fourth-biggest gainer on the New York Stock Exchange, climbing 75 cents a share, or 11.1 percent, to $7.50. Over the past two days, MNC has regained all of the losses suffered since Aug. 31. It sank to a low of $5.75 a share Thursday before closing at $5.875.
Analysts shrugged off yesterday's rise as partly a rebound from last week's heavy slide and partly more of the same sort of rumor-driven volatility that began nearly two weeks ago. For the most part, they have been stumped in their attempts to pin the stock's fluctuation to a definite cause.
"Only the directors know," said Elizabeth Hayes, a banking analyst at Johnston, Lemon & Co. in Washington, echoing other observers. "For the last three weeks, we've been in a sort of no man's land. They can't talk, you don't know, and rumors fly."
Much of the talk in recent weeks has centered on today's anticipated announcement, expected after the stock market closes, regarding MNC's quarterly dividend, now 29 cents a share.
At a regularly scheduled board meeting this morning, MNC's directors are expected to vote on whether to maintain, reduce or abolish the dividend in the wake of a $75 million second-quarter loss brought on by the slumping real estate market.
With 84.8 million common shares outstanding, MNC would pay more than $98 million to stockholders over the next 12 months at its current $1.16 annual dividend rate.
MNC also has apparently come under some selling pressure recently from investors made nervous by the impending conclusion of a federal examination of the banking company. The fear is that regulators, after poring over the company's loan portfolio, may force MNC executives to reclassify a number of real estate loans as potentially uncollectible and thereby cause further losses.
The company also said Aug. 6 that it was negotiating with its largest stockholder, Alfred Lerner, for an infusion of $180 million in capital to help bolster MNC's financial condition after a series of securities down grades left the company unable to tap a traditional source of capital.
Though no announcement regarding the federal examination is expected today, some analysts warned that any news about the dividend is likely to be interpreted as reflecting the wish of regulators.
But just what sort of sign it would be remains unclear.
If the dividend is not cut, "the bulls are going to say the regulators are in there and the regulators said they could keep it," said David S. Penn, a banking analyst at Legg Mason Inc. "The bears are going to say, 'They're crazy. They're trying to raise equity and here they are paying out equity.'"
If the dividend is cut, "they are going to say the regulators made them eliminate it," he said. "Regardless of what happens, there are going to be all different kinds of interpretations, and we're not going to know what really happened until mid-October," when MNC reports its third-quarter earnings.