East West shares soar after deal
Wall Street thinks Pasadena-based East West Bancorp made a sweet deal to buy rival United Commercial Bank in a takeover brokered by the Federal Deposit Insurance Corp.
Shares of East West, now by far the largest bank focused on the Chinese American market, rocketed $4.76, or 55%, to $13.41 on Monday.
The FDIC seized loss-ridden United Commercial on Friday and agreed to sell the San Francisco lender to East West. The deal boosts East West’s assets to $19 billion, from $12.5 billion. The FDIC agreed to cover most of the expected additional losses on United Commercial’s loan portfolio.
The takeover greatly expanded East West’s geographic reach, giving it branches in 21 U.S. cities outside California as well as locations in Shanghai, Hong Kong and the Chinese city of Shantou.
In California, the bank now has 112 branches, up from 68 before the deal.
Even though East West is in the red this year as loan losses mount, Wall Street clearly now sees the bank as a survivor. Still, the stock remains far below its record high of $43.30 in 2004.
Several brokerage analysts rushed to boost their ratings on East West. Michael Diana of Noble Financial Group in New York raised his rating to “buy” from “hold,” citing the potential for “massive” cost savings in the merger from what he figures will be consolidation of overlapping East West and United Commercial branches in California.
East West Chief Executive Dominic Ng, however, told The Times that he expected only a “few” branches to be closed as a result of the deal.
Morgan Stanley analyst Ken Zerbe boosted his East West rating to “overweight,” or “buy,” from “equal weight,” or “hold,” and Sandler O’Neill analyst Aaron Deer removed his “sell” rating, raising the stock to “hold.”
--
