October 2004  Email this  Print this
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STOCKS
Commerce Bancorp: Growing Pains
by Jeffrey R. Kosnett For a decade, the stock of Commerce Bancorp behaved more like a high-tech wonder than a regional bank with big aspirations. At a peak of $65 in June, Commerce shares had soared thirteenfold in ten years. But by mid August, they had retreated to $49. You can't attribute the weakness entirely to the indictment in June of two mid-level Commerce officers in a Philadelphia bribery scandal. The company says it wasn't involved and faces no charges itself.
Commerce, which operates in the Mid-Atlantic region, has grown swiftly by emphasizing free checking, night and weekend hours, and friendly service. It plans to invade the Washington, D.C., area in 2005, then Boston. Some analysts think D.C. will be harder to crack than the Big Apple, where Commerce exploited rivals that kept hours short and fees high.
Another concern: The bank holds a large securities portfolio. It owns mortgage securities worth $16 billion, 65% of its total assets. If long-term rates were to climb one percentage point, Commerce's investments could take a $640-million hit.
Analysts see Commerce earning $3.23 per share in 2004, up 25% from last year -- a nice gain but slower growth than in previous years. The stock (symbol CBH) sells for 15 times the 2004 forecast. That's high for a bank but well below its average price-earnings ratio of 23 for the past six years. The stock, which we recommended in the fall of 2001 at $31, should be avoided for now. If you already own it, take your profits, unless doing so would cause tax problems. | 
MAGAZINE
