A Southern Belle Not Looking For Suitorsby
Florida brings to mind palm trees and pelicans more than it does banking powerhouses. But drive through almost any town in the Sunshine State, and you're likely to see a green-and-white Barnett Bank sign in front of a branch office. Barnett Banks Inc. is preeminent in Florida, and it aims to keep on growing.
Chairman and CEO Charles E. Rice, 57, the architect of Barnett's expansion over the past decade, ought to be sitting pretty. Instead, he must contend with periodic rumors that his bank could be an acquisition target. With its dominance of the most attractive banking market in the country--Florida gets more than 750 new residents every day, many of them with hefty retirement caches--Barnett exemplifies the banks that bigger companies will want to swallow up as the industry consolidates.
BARRIERS, FOR NOW. Barnett doesn't need to worry right now. Two of its regional rivals, First Union Corp. and NationsBank Corp., both in Charlotte, N.C., are busy digesting a spate of recent acquisitions. And Atlanta's SunTrust Banks Inc. as well as Wachovia Corp. in Winston-Salem, N.C., Barnett's other big neighbors, appear unlikely so far to wage unfriendly takeover battles. Also, legislation passed in nine Southeastern states and the District of Columbia has created a pact barring predators from elsewhere. But already, North Carolina's legislature has voted to modify the multistate treaty to allow for full nationwide banking in 1996. Congress could lower barriers even sooner.
It's ironic that Barnett--whose growth has come largely through making acquisitions--now finds itself as a potential target. Ten years ago, it had $9.4 billion in assets and 14.4% of all deposits in the state of Florida. Today, however, it boasts $37 billion in assets and a 27% share of deposits.
Barnett is also building on an extremely powerful franchise. It has charged off many troubled real estate loans--they now account for 17% of the portfolio, down from 28% in 1988--and the bank is concentrating on small and midsize business customers. It's also hawking more products in its 637 retail outposts, capitalizing in part on heavy use of bank branches by older customers. Barnett has banking relationships with 43% of the elderly with incomes over $35,000, and with 40% of the state's households. Barnett's second-quarter earnings--$104 million--set a record.
Barnett's near lock on its market may be tempting to would-be buyers, but the prospect of suitors doesn't faze Rice. "I don't dwell on it," he says. He and President Allen L. Lastinger Jr. believe that Barnett is best off independent. They vow to keep earnings growing, a move that should keep the stock high enough to deter buyers. Says Lastinger: "I can tell you the price is not going to be cheap."
Right now, though, Barnett's stock is trading at 1.8 times the company's book value, only slightly higher than other regional bank stocks--good news, perhaps, for acquisition-hungry bankers.