Originally created 08/15/98

Brokerage stock jumps on byout rumors

ATLANTA -- Rumors that regional stock brokerage Interstate/Johnson Lane is an acquisition target have pushed up its stock price and activity in recent days, but company officials and analysts dismiss the speculation as unfounded.

The stock closed Friday at an all-time high of $41 per share on volume of 91,300 shares, nearly 14 times its normal volume.

Its price had jumped 12 percent Thursday.

Several news organizations reported that one of three North Carolina firms was preparing to buy the Charlotte-based regional brokerage.

They reported banks Wachovia Corp. and Centura Banks Inc., as well as insurer Jefferson-Pilot Corp., were likely suitors.

Officials from each of those companies, including Interstate/Johnson Lane, refused to comment

"We do not comment on speculation about our stock price or our company's future," said Hillary Carr, spokeswoman for Interstate/Johnson Lane.

"Purely speculation," said Michael Flanagan, a regional-brokerage analyst with Financial Service Analytics. "There are just too many loose ends to the story."

He noted that the rumor never mentioned a price, which would have lent more credence to the report.

Interstate/Johnson Lane's longtime chairman, Parks Dalton, stepped down in January to be replaced by James H. Morgan, who was already the firm's president.

The firm has enjoyed solid earnings, which rose 25 percent for the six months beginning March 31.

With 60 branches and 1,500 employees, Interstate/Johnson Lane resulted from the 1988 merger of Charlotte-based Interstate Securities and Savannah-based Johnson Lane Space Smith & Co.

Citizens & Southern National Bank spun off Johnson Lane in 1933 when the Glass-Stegall Act prohibited banks from underwriting stock issues.

But in the last 10 years, banking regulators have reinterpreted Glass-Stegall and decided banks could legally own brokerage firms that underwrite stock issues as long as certain restrictions were followed.

Congress has debated repealing the law in some fashion for nearly 20 years.

Banks have increasingly sought to buy regional brokerage firms as a way to reclaim market share that dropped from about 70 percent of all financial transactions in the early 1980s to roughly 40 percent now, according to Fritz Elmendorf, vice president of the Consumer Bankers Association.

"Generally buying brokerage firms has contributed to fee income at banks, and banks have been experiencing a reduction in their traditional income from loans," Mr. Elmendorf said.


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