Matthew Goldstein

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Commerce Bancorp Backs Estimates

Matthew Goldstein

Commerce Bancorp(CBH Quote - Cramer on CBH - Stock Picks), the New Jersey lender entangled in a Philadelphia municipal corruption scandal, expects to meet or exceed analyst earnings estimates for the third quarter.

The bank, which did not offer any numerical range for its third-quarter earnings, provided the updated guidance in a corporate filing on Wednesday. The bank offered a similar prediction for total 2004 earnings.

Wall Street analysts, according to Thomson First Call, currently expect the Cherry Hill, N.J., bank to earn 83 cents a share in the quarter. For the full year, First Call has the bank earning $3.23.

The fast-growing bank, which has branches across New Jersey, Pennsylvania and New York City, said the dollar volume of its government deposit business is up 63% over the past year. Analysts and investors are keeping a close eye on the government deposit business to see if the Philadelphia scandal causes some local governments to transfer accounts to other banks.

Commerce's shares have been under pressure ever since federal prosecutors in Pennsylvania indicted two executives of Commerce's Pennsylvania banking subsidiary for their alleged role in a Philadelphia influence-peddling scheme. Prosecutors charge Glenn Holck, president of Commerce Bank/Pennsylvania, and Stephen Umbrell, a vice president of the subsidiary, were part of a criminal conspiracy to arrange special loans for a former Philadelphia official, who in turn awarded lucrative bond underwriting and other banking deals to Commerce.

The bank has not been charged with any wrongdoing and the executives, who pleaded innocent, say they did nothing wrong. But Commerce is moving to get out of the municipal bond underwriting business in the wake of the scandal.

Recently, the NASD began making inquiries into past political contributions the bank made to government officials. The NASD inquiry is similar to one launched a year ago by the Securities and Exchange Commission.

Commerce stopped making political campaign contributions in December 2003, following a number of critical news stories regarding the practice.

Commerce shares are down nearly 17% since the corruption scandal broke. The stock, however, has rallied back in recent weeks, after losing 25% of its value. In early trading Wednesday, shares of Commerce were down 84 cents, or 1.6%, to $53.44.