A 'private banker' lands a big deal
Stuart Greenberg is a bank's worst nightmare. A veteran banker, most recently with the National Bank of Washington, Mr. Greenberg quit about eight years ago to become a "private banker" (years before the industry's recent bloodletting turned thousands of more reluctant bankers into consultants).
Working out of his Roland Park home, he uses his knowledge of the business to help small- to mid-sized companies renegotiate their banking relationships.
Mr. Greenberg's latest big deal is a $40 million credit package he helped negotiate for ALC Communications Corp., the Bingham Farms, Mich.-based parent of the Allnet Inc. long-distance telephone company. The deal was signed last week.
Mr. Greenberg knew the chief financial officer from his days at NBW, and a few years ago he helped renegotiate ALC's "lockbox" agreement with its former bank. "They were spending 26 cents an item on 350,000 items a month on the lockbox," Mr. Greenberg said.
He knew what the bank could afford and talked it down to 15 cents, saving ALC nearly a half-million dollars a year.
This time, Mr. Greenberg shopped around for a better debt agreement, advised the company to switch to Banc One, hammered out a more flexible contract and managed to lower the company's interest rates.
No estimates exist on how much this new credit package will save the company, but the CFO was satisfied, according to Mr. Greenberg. "We got more credit this time, better pricing, and he said, 'I'll see you next time.' "
GEICO or AVEMCO? Market casts its vote
When GEICO Corp. announced last week that it was "contemplating" selling its 34.1 percent stake in AVEMCO Corp., the Frederick-based specialty insurer, both companies gave it a predictably positive spin.
GEICO, based in Washington, owns 3.89 million shares, which were worth about $84 million when the announcement was made last Thursday.
The president of GEICO's insurance operations, O.M. Nicely, said that "GEICO has been pleased with its more than 12-year affiliation with AVEMCO" and that its "decision is part of an ongoing program to focus activities on its core automobile insurance business."
AVEMCO President William P. Condon said that "GEICO's decision provides excellent opportunities for AVEMCO to achieve a broader dispersion of its stock and to repurchase some of these shares under its ongoing stock repurchase program."
So, whose explanation did Wall Street find more credible? You be the judge. On Friday, the day after the announcement, GEICO's stock gained 12.5 cents, to close at $52.375 a share. AVEMCO's stock dropped 7.5 percent, or $1.625 a share, to $20.
GEICO had better hurry if it's going to sell. In one day, its stake fell by more than $6 million.
Baltimore Bancorp attracting stock-pickers
The analysts are warming up to Baltimore Bancorp, parent of the $2.4 billion Bank of Baltimore. Last week, two more joined a small but growing rank of those who believe the company is a good investment.
First, Anthony Polini, an analyst at Mabon Securities Corp., initiated coverage on Bancorp with a "buy" rating that predicts that the stock could rise 40 percent within 12 months. Then, Vernon Plack, the new banking analyst at Johnston Lemon Co. in Washington, changed his firm's rating from a "neutral" to a "buy."
Mabon's Mr. Polini said Bancorp is "a budding turnaround play well below book" value. Its price of $8.375 at the time of his report was 85 percent of the year-end book value of $9.61 a share. (The stock closed unchanged yesterday, at $8.75.) Regional banks are trading at an average of 1.45 to 1.5 times book value.
The company should announce strong second-quarter earnings on July 14, including a decline of between 8 percent and 12 percent in its still-high nonperforming assets; a mild growth in noninterest expenses; and continued "attrition" of high-paying brokered certificates of deposit, which should improve the company's net interest margin, according to Mr. Polini.
"We strongly recommend purchase of BBB given its attractive valuation and favorable outlook for improved financial performance," Mr. Polini concluded.
Mr. Plack, of Johnston Lemon, is focusing mainly on the reduction in nonperforming assets.
"Basically, it's a turnaround in asset quality," he said, "and that will be reflected in the stock."
Chief financial officers see easier bank credit
It hasn't been an encouraging few months for those following the economic data. So this survey from Robert Half International, the financial services hiring firm, is welcome news.
From a national poll of 1,000 chief financial officers, Robert Half found that 31 percent believe that banks will ease credit within 12 months, compared with 26 percent who predict tighter credit. Thirty-two percent saw no change in credit policies ahead; 11 percent said they didn't know.
The most optimistic CFOs were in Pennsylvania, New Jersey and New York, where 40 percent saw bank credit easing in the coming year.
"CFOs believe that the savings and loan crisis is over and seem to feel that banks have learned a lesson from the overly aggressive lending strategies of the '80s," said Max Messmer, chairman and CEO of Robert Half.