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Coffee Talk
Business Observer Friday, Dec. 17, 2004 14 years ago

Coffee Talk (Tampa edition)

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This week's items: Analysts split on Fifth ThirdPlay ballLending a handNot just talkDown is good

Coffee Talk (Tampa edition)

Analysts split on Fifth Third

A bank that Gulf Coast rivals should probably watch closely over the next few years is causing some division among stock analysts. Which way, Fifth Third Bancorp?

Since Labor Day, Advest, Robert W. Baird, Merrill Lynch and Morgan Stanley have all lowered their ratings for the Cincinnati bank, which is elbowing its way into Florida.

Fed approval of Fifth Thirdis acquisition of Naples-based First National Bankshares of Florida Inc. came through on Dec. 14.

But one analyst is heading in the opposite direction. Punk Ziegel & Co.is Richard X. Bove recommended Dec. 10 that investors buy Fifth Third. Bove, who works out of Pinellas Park, initiated coverage of the bank in October with a market-perform advisory.

Bove has expressed appreciation for Fifth Third tidying up its balance sheet sooner rather than later. (See iIs Fifth Third first again?i Coffee Talk, Dec. 10-16.) But he especially likes the stock since it plunged on news of the bankis costly restructuring.

iWe believe that it is dramatically under priced now,i Bove wrote in a Dec. 10 report. Fifth Third was selling at 16 times last yearis earnings at the time.

Bove apparently received some criticism for his upgrade of Fifth Third and has come back with a strong defense. In a Dec. 15 follow-up report, Bove spells out why Gulf Coast bankers should be concerned about Fifth Third.

He says Fifth Third is good at stealing market share. In fact, the difficulty in finding profitable places to invest all those new deposits led to the recent charges against earnings, he says.

More ominously for the competition, Fifth Third has shown itself to be adept at bringing in commercial and industrial borrowers, according to Bove.

Finally, Bove has reluctantly come to endorse the $1.6 billion that Fifth Third is paying for First National Bankshares of Florida, which has a Gulf Coast branch network that extends north into Tampa.

iThe move into Florida was not as extreme as we initially thought,i Bove writes. Fifth Third already had more than a dozen offices in Naples and Fort Myers. Adding to that Florida toehold was going to be costly, whichever way the bank tried to expand.

Play ball

Carlton Fields PA is starting up a sports-and-entertainment law practice with the recruitment of St. Petersburg attorney Ben J. Hayes, a former Major League Baseball pitcher.

Hayes serves as president of the New York-Pennsylvania Professional Baseball League Inc., a Minor League Baseball governing group that covers eight states. And he has served seven years as secretary and general counsel to the National Association of Professional Baseball Leagues Inc., which governs Minor League Baseball play throughout the nation.

Hayes pitched for the Cincinnati Reds and St. Louis Cardinals professional baseball teams. At the University of Florida, he helped coach the schoolis baseball team to its first NCAA College World Series.

Lending a hand

Market Street Mortgage Corp. is taking over 19 residential-lending offices in eight states as it tries to become the nationis biggest originator of home loans.

The Clearwater subsidiary of NetBank FSB is acquiring the offices from Guaranty Residential Lending Inc. for an undisclosed amount.

Market Street Mortgage and its ultimate owner, Internet bank NetBank Inc., need to do something. Last month, NetBank reported third-quarter profit dropped nearly 75%, compared to the July-to-September period in 2003.

NetBank, based in suburban Atlanta, blamed the decline on a big dip in quarterly earnings within the segment of the company that includes Market Street Mortgage.

To Coffee Talkis amazement, NetBank did not use the hurricanes that hit Florida last summer as an excuse for the poor results. Almost 10% of the mortgages that NetBank wrote last year were for Florida properties, just behind California in the top spot.

NetBank ifessed up and told investors that increased competition was shrinking margins.

The all-purpose hurricane rationalization wasnit going to fly for NetBank anyway. Earnings for the first nine months of 2004 were down 64% from the same time last year within that troublesome segment where Market Street Mortgage resides.

Enthusiasm for NetBank has cooled considerably on Wall Street as a result of the depressing news. Three brokerage firms have downgraded the stock so far this year, including a September adjustment by Raymond James & Associates Inc. from market-perform to under-perform.

Not just talk

Sarasota car dealer Vern Buchanan, chairman of the Florida Chamber of Commerce, means business when he says the state must move forward on tort reform.

In a Dec. 13 letter to Gov. Jeb Bush, Buchanan announced the creation of the Florida Justice Reform Institute o an iunprecedented, long-term, united, CEO-led entity focused on a single goal: fixing Floridais ailing civil justice system by returning stability, personal responsibility, predictability and fairness to the system.i

Buchanan says the chamber has recruited some of Floridais top CEOs, won endorsement from the CEO leadership of the Florida Council of 100 and raised more than $1 million for lobbying purposes.

Action must be taken, Buchanan says, because a recent institute survey claims Floridais legal system ranks 38th in the nation. He wants to mold Floridais legal system after changes made in states such as Michigan, Illinois, Mississippi, Texas and Alabama.

iTo this end, (the institute) has already built a state and national network of fundraising, resources, lobbyists, attorneys and experience to make this low-governance, high-impact program successful in the next (legislative) session and the next decade,i Buchanan wrote.

Down is good

Gulf Coast area lawyers and business leaders might take some solace that none of the courts in Hillsborough, Manatee, Pinellas and Sarasota counties made the list of 2004 Judicial Hellholes. Thatis an annual survey of members of the American Tort Reform Association, which bills itself as a bipartisan coalition of business and government leaders.

Of the top nine hellholes, only the South Florida courts of Broward, Miami-Dade and Palm Beach counties made the list. The tri-county region ranked seventh on the list behind Madison County and St. Clair County, Ill.; Hampton County, S.C.; West Virginia; Jefferson County, Texas; Orleans Parish, La.; Philadelphia; and Los Angeles.

Courts in the report (www.atra.org) were ranked on issues such as forum shopping, novel legal theories, discovery abuse, consolidations and joinders, improper class certification, unfair scheduling, excessive damages, uneven application of evidentiary rules and other matters.

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