Marshall & Ilsley: The Prize Catches Being Eyed By Big Banks

Merger fever has taken hold of bankers. Hoping to grab market share, large banks are shopping among their smaller brethren. Several thousand of the nation's 11,806 commercial banks could be swallowed up in the coming consolidation. True, potential buyers are moving slowly. Lower interest rates and stronger earnings have boosted the value of even weaker banks. But patient investors can still find attractive buyout candidates. The following banks are among those whose stocks generate the most takeover talk.


"Your Strong Partner." That's how Marshall & Ilsley Corp. describes itself in its advertising campaign. But it's also how a number of out-of-state banks on the acquisition trail have begun to view Wisconsin's second-largest bank holding company. Says analyst Thomas H. Hanley of First Boston Corp.: "You can kiss it goodbye."

Among the hordes of possible buyers who are interested in using M&I to expand their now-minimal presence in Wisconsin, say analysts, are Chicago's Northern Trust, KeyCorp of Albany, N.Y., and NBD Bank of Detroit.

M&I would be a prize catch. Founded in 1847 in Milwaukee by Samuel Marshall and Charles F. Ilsley, the bank is solid, profitable, and located in a state with a surprisingly resilient economy. And with $7.4 billion in assets, M&I has a relatively pristine balance sheet. Nonperforming assets make up less than 1% of total assets. "By practicing conservative banking principles, they've outshone almost all the other larger banks in the U.S.," says William Hummer, a leading Midwest bank analyst with Chicago's Wayne Hummer & Co.

CROWN JEWEL. Then, there is M&I's crown jewel, its data processing business. It handles back-office chores for 400 other banks. "The processing business is worth a fortune," says Hanley. Fee income from this operation was $27.2 million in this year's second quarter, up almost 25% from a year ago. The bank's overall return on equity in the second quarter was an above-average 17%. And that's likely to improve. Analysts forecast 1992 earnings of $4.98 a share, or 10% higher than in 1991.

M&I won't go cheaply. At 59 5/8, the stock is double its 1990 close. It's also almost double its book value and 12 times estimated 1992 earnings. Still, many analysts expect further appreciation. Hanley, for one, sees a price tag in the 70s before yearend.

Marshall & Ilsley's chairman of 29 years, John A. Puelicher, won't respond to questions about a potential takeover. The bank has traditionally avoided publicity. But its low profile is unlikely to discourage those who have M&I in their sights. For many banks, having Marshall & Ilsley as a partner has a logic too compelling to ignore.

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