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SUNDAY, FEBRUARY 25, 2007
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Compass shares volatile before BBVA buyout

The announcement that Spanish Banco Bilbao Vizcaya Argentaria would pay $71.82 per share (in cash and stock) for Compass Bancshares came — officially — before the market opened Feb. 16. At close Feb. 14, the shares were up a tad, on slightly higher than usual volume, at $61.78.

Then came Feb. 15. In the absence of any announcements by BBVA or Compass, the Birmingham bank’s shares jumped more than 7 percent on volume of 4 million, about quadruple the normal shares traded.

Someone knew something.

It could have been relatively innocuous. Federal Aviation Administration records confirm a BBVA jet, for example, frequented Birmingham beginning in January; clever investors may have noticed. Some in Birmingham noted that the lights on Compass’ top floor were staying on later than usual in the days before the announcement.

BBVA, with massive holdings in Mexico and throughout Latin America, is not just any bank. Its niche fits squarely into this country’s ongoing immigration debate. Its specialty is cross-border banking.

Deposit money in your Texas ATM and a few minutes later your wife in Mexico can withdraw it. No need for Western Union or a money order.

The bank’s “natural advantage” in the U.S. market, its chief executive officer recently explained, “was with the Spanish-speaking community and the remittances market with Mexico.”

BBVA’s main U.S. holdings, strengthened with the Compass deal, are in Texas, where one-third of the population speaks a language other than English at home. The talking heads predict BBVA will ditch its newly acquired Alabama holdings, but question whether it will make a stab at marketing to the same community here.

About 5 percent of the population in most of Compass’ Alabama markets speak a language other than English at home, and that’s according to notoriously conservative U.S. Census records. A study by the Inter-American Development Bank estimated immigrants in Alabama remitted $219 million, in average chunks of $300, to people in Latin America in 2006.

Consolidation unlikely

For everyone but shareholders, bank mergers tend to be a negative.

The Regions-AmSouth merger is a case in point. The transaction made sense for shareholders for the same reason it damaged local economies: consolidation. By closing its duplicative Birmingham headquarters, the merged entity could reduce costs without reducing revenue.

In Decatur, the same cost-cutting approach has AmSouth’s downtown office on the selling block.

Compass employs more than 400 in Decatur, most at its credit card processing facility. That’s the sort of operation that would be ripe for consolidation in most acquisitions, but BBVA has no holdings in Alabama. If it decides to retain its Alabama holdings, that increases the likelihood that Decatur can hold on to those jobs.

The other possibility is that BBVA will sell its Alabama assets, retaining Compass’ holdings in the border states of Texas, Arizona and New Mexico. If that happens, let’s hope the buyer wants a North Alabama presence, but doesn’t already have one.

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Eric Fleischauer
Capital considerations

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