Bank-Buyout Gamblers Stay in the Game

Investors are once again spinning the wheel and hoping to find the next bank buyout in the wake of Royal Bank of Scotland's $10.5 billion bid for Charter One(CF).

In early afternoon trading Wednesday, the stocks of big regional lenders were soaring, even as the broader market treaded water. Some of the day's biggest gainers include Amsouth(ASO), up 57 cents, or 2.5%, to $23; Comerica(CMA), up $1.23, or 2.3%, to $53.72; MAF Bancorp(MAFB), up $1.25, or 3%, to $43.05 and National Commerce Financial(NCF), up $1.44, or 5.4%, to $28.22.

The surge in regional bank stocks also was reflected in the 21-point rise in the Nasdaq Bank Index, an index of 535 small to midsize lenders.

It's hard to resist the temptation to place a bet on the next bank merger, and there's no doubt more deals are in the offing. Banking experts say there are far too many bank companies in the U.S. and consolidation is the easiest way for big lender to either add deposits or gain a foothold in a geographic market.

Including this latest deal, there have been 93 announced bank mergers in 2004 valued at $90 billion, according to Thomson Financial. This year's tally includes J.P. Morgan Chase's(JPM) monster $59 billion acquisition of Bank One(ONE).

But with hundreds of banks looking like potential buyout candidates, bank analysts and professional investors say individuals are playing a dangerous game if they try to handicap the next winner.

Indeed, much of the speculation surrounding Royal Bank of Scotland, which has been on the prowl for a U.S. bank for months, had Britain's second-largest lender focusing its sights on Philadelphia-based Sovereign Bancorp(SOV). Last November several British newspapers were making a deal between the two banks sound imminent.

Cleveland-based Charter One, meanwhile, long has been on many investors' list of potential buyout candidates. But few had the lender being bought by Royal Bank of Scotland.