Zoya. Check this story out. Be careful!
Net fever strikes NetB@nk stock
By Kora McNaughton
Staff Writer, CNET News.com
April 13, 1999, 3:25 p.m. PT
With a mere $280 million in assets, NetB@nk could hardly be considered serious
competition for such financial giants as Wells Fargo and Citibank, but investors
are pricing its stock as if it were.
The Alpharetta, Georgia-based bank, which operates only on the Internet, went public in
July of 1997. Until late last year, investors found little to get excited about. Although
NetB@nk is profitable, its predecessor in the online-only banking market, Security First
Network Bank, had suffered losses until finally being acquired for $20 million by Canada's
Royal Bank last year.
But the market seems to have forgotten Security First Network Bank's story in its
optimism about NetB@nk, whose shares have been climbing steadily. Today, the stock
jumped 76.5156 points to 235.0156, a rise of 48 percent, after the company announced a
3-for-1 split, effective for shareholders of record on April 23.
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The two investment banks that follow NetB@nk stock, Bear Stearns and Raymond James,
both maintain "buy" ratings on it.
Other online financial stocks made strong gains today as well, including E*Trade, which
jumped 31 percent to 125.50, a gain of 29.50, and Ameritrade, which added 31 to 173.25.
Even shares of Equitex, a holding company that invests in financially troubled companies,
got a boost after the company announced its acquisition of First TeleBanc. The Florida
company, which has just $5 million in assets, hopes to enter the online banking market
this summer. Equitex shares jumped to 41.875, a gain of 18.4375.
Other Internet-only banks include CompuBank, Telebank,
and First Internet Bank of Indiana.
Equitex, E*Trade and NetB@nk, whose products include
checking accounts, bill payment and even mortgages, are
riding a wave of enthusiasm for online finance companies.
According to a recent report, online stock trading volumes
grew 30-35 percent in the first quarter, compared to the
previous quarter, as Net brokerages continue to take market
share away from traditional brokers.
But the Internet isn't likely to revolutionize banking in the
same way it changed stock trading, according to analyst Rob
Sterling of Jupiter Communications. "People who are looking
for [online banks] to succeed as wildly as Internet brokerages are barking up the wrong
tree," Sterling said. "The Internet's revolution of brokerages was about access the market
at a low cost. Banks already went through that with ATMs in the '80s."
Jupiter has predicted steady but not spectacular growth in online banking, with 10.2
percent of U.S. banking households adopting it this year, 13.4 percent in 2000 and 15.7
percent in 2001.
NetB@nk may be an early mover in the online banking area, but it doesn't represent a
serious threat to banks with an offline presence, most of whom offer Internet access to
accounts. "The major banks are showing signs that they are able to convert customers
cost-effectively and have a motive for developing the channel," said Chris Musto, a senior
analyst with Gomez Advisors. In fact, Wells Fargo added 150,000 online banking
customers in the first quarter of this year, according to spokeswoman Wendy Grover,
bringing the bank's total to 820,000. NetB@nk had just over 20,000 accounts by
mid-February.
Those number make many analysts wary of NetB@nk's ability to create a major bank out
of an online presence. NetB@nk's stock gain "is just general Internet stock hysteria," said
Scott Smith, an e-commerce analyst with Tera Group.
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