The Hungry Eyes Looking At Barnett Banks

As a regional bank, Florida-based Barnett Banks has become a fast-rising star. And on Wall Street, a number of pros are betting that the bank will soon shine--as a takeover target.

The Street has yet to catch up with Barnett, though: It has surprised analysts over the past four quarters by posting higher-than-expected earnings. "The next time Barnett surprises analysts," says one New York money manager, "it will be about a buyout bid--most probably from NationsBank," which has been tightening its grip in the Southeast through acquisitions. This pro thinks North Carolina-based NationsBank is trying to move fast before liberalized interstate banking is introduced. Should that happen, he says, BankAmerica and Banc One may also go after Barnett.

That's one reason why Portfolio Manager Robin West of the New Mexico State Investment Council has been accumulating shares since last summer, when Barnett was 36 a share. "A lot of people on the Street follow Barnett, but most of them are missing a lot," says West. She says Barnett remains "very much undervalued, both as Florida's most dynamic bank and as a buyout candidate."

Katherine Hensel, an analyst at Lehman Brothers, is also high on Barnett. She argues that the bank's superior franchise and deep market penetration in Florida makes it "an obvious takeover candidate" for NationsBank. She believes NationsBank wants to dominate or at least be a major player in every market it serves--as it is in Georgia, North Carolina, and South Carolina.

KEY PROVIDER. So, says Hensel, it behooves NationsBank to build up its weak third-place position in Florida. Barnett, she notes, has the dominant franchise in a state "with one of the strongest demographic profiles in the country." Barnett is the primary provider in Florida of single-family-home mortgages and controls some 40% of consumer loans and 27% of the commercial loan market.

Hensel's earnings forecast for Barnett are higher than the consensus estimates. She sees earnings of $3.90 a share this year and $5 in 1994. And she puts a takeover price at 65 to 70.

The stock has been rising on the Big Board since December, climbing from 40 to 47. One takeover investor says some informal talks have already taken place between NationsBank and Barnett executives. A Barnett spokesman declined comment.

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