Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 11, 1990 TAG: 9004110155
SECTION: BUSINESS PAGE: C4 EDITION: METRO
SOURCE: MAG POFF BUSINESS WRITER
DATELINE: LENGTH: Medium
But the callers didn't want to dump their Dominion stock, according to Richard Wertz, assistant manager of the brokerage firm's office.
Most of them, he said, were interested in buying at the lower price.
They weren't alone. Dominion's stock rose a half-point Tuesday in heavy trading. The stock closed at 15 7/8 after trading in a range of 15[ to 16.
Wertz said 519,900 shares changed hands. That's more than four times the average of 125,000 shares, according to Donald Kinzer, senior vice president at Dominion.
About 410,000 traded Monday when the stock fell 1 3/4 points from 17[ to 15].
The sell-off followed Dominion's announcement late Friday that it would delay issuing its first-quarter report until completion of a federal audit of its real estate portfolio. The bank said it expected a requirement for an addition to its loan loss reserve, or capital. This would significantly reduce its quarterly and annual profits.
Lacy Shockley, who follows Dominion for Smith Barney in New York, said the market is "hysterical toward financial stocks." She said the market overreacted to current federal audits of real estate holdings at Dominion and other banks.
Large investors are "knocking" the stocks, she said, for reasons that have nothing to do with the soundness of the banks.
Shockley said part of the problem is that federal auditors are in the early stages of their examinations of bank real estate portfolios. As examinations continue, she said, the impact on loan loss reserves will become clearer and the markets will become less nervous.
Stricter federal standards are good for the industry in the long run, Shockley said. When the auditors leave, she said, bank asset reports will enjoy new credibility.
Anthony Davis, banking analyst with Wheat First Securities in Richmond, said the audits have no impact on the soundness of Dominion and don't endanger its capital position. The audit will interrupt Dominion's earnings momentum, Davis said, but he doubts the bank will actually lose money.
The audits, he said, result from the tighter regulatory environment and deterioration of the real estate market. Industry-wide, he said, banks have had a "belated response" to erosion of real estate values.
Dominion fell hard Monday because the announcement was unexpected, Davis said.
Although Dominion is the first bank in Virginia to undergo an examination, Davis believes it wasn't singled out. He said the schedule probably relates to timing of the last federal audit.
The examination, Davis said, does not indicate a panic situation.
Kinzer, the Dominion vice president, said he's heard speculation that the audits will make banks more conservative in lending for real estate development, thus slowing the construction economy.
He could not comment on Dominion's situation while the audit is in process, but he said it would cause no reduction in consumer lending.
by CNB