Signet Banking Corporation

21 Pages Posted: 30 May 2017

See all articles by Susan Chaplinsky

Susan Chaplinsky

University of Virginia - Darden School of Business

Robert S. Harris

University of Virginia - Darden School of Business

Brad Jordan

affiliation not provided to SSRN

Mitchell Redd

affiliation not provided to SSRN

Abstract

This case investigates the alternatives that Signet Banking Corporation faced in 1995 as it attempted to restructure itself; the market perceived Signet to be undervalued, especially in light of the strong performance of its credit card division. Students must choose among several competing proposals to enhance shareholder value.

Excerpt

UVA-F-1221

SIGNET BANKING CORPORATION

In July 1994, Wallace B. Millner considered the future of the Signet Banking Corporation. Having been an employee of the company for more than 20 years and currently serving as chief financial officer (CFO), Millner had seen the company survive its share of good and bad times. The U.S. economy was just coming out of a recession and Signet's earnings and stock price had both increased greatly in the past year. Although the bank had recently performed well, many cost-related problems in the core bank were masked by the tremendous success of the credit card division (CCD). Under the new and innovative management, the division had grown far beyond expectations and was a major catalyst in the turnaround of Signet's performance. Millner and other members of senior management were concerned, however, that the financial markets did not recognize the value of Signet's consolidated operations. It was their responsibility to ensure that the company's stockholders received the maximum return on their investment. Millner had to make a recommendation soon to Signet's board of directors on several proposed restructuring plans that could dramatically affect the future of the bank. Now the dilemma for Millner and the others was to determine which course of action offered Signet's shareholders the greatest value.

Background of Signet

Signet Banking Corporation was a registered bank holding company headquartered in Richmond, Virginia. At the end of 1993, the company had 239 offices located throughout Virginia, Maryland, and Washington, D.C. Based on total assets, Signet was the second largest bank holding company headquartered in Virginia and the 63rd-largest bank in the United States. Exhibit 1 gives a list of comparable Southeastern U.S. banks. Like the majority of other bank holding companies, Signet provided financial services such as consumer and commercial loans, checking and savings products, mortgages, and credit cards. The company focused its sales and expansion efforts in and around the markets in which it was located.

Industry Background

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Keywords: corporate restructuring, financial services, valuation

Suggested Citation

Chaplinsky, Susan J. and Harris, Robert S. and Jordan, Brad and Redd, Mitchell, Signet Banking Corporation. Darden Case No. UVA-F-1221, Available at SSRN: https://ssrn.com/abstract=2974369

Susan J. Chaplinsky (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4810 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/chaplinsky.htm

Robert S. Harris

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Brad Jordan

affiliation not provided to SSRN

No Address Available

Mitchell Redd

affiliation not provided to SSRN

No Address Available

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