Beneficial's stock drops on news of probe

Posted: April 28, 2013

Share values for Beneficial Mutual Bancorp Inc., the largest bank still based in Philadelphia, fell 5 percent to $9.46 Thursday after Beneficial told investors that the Justice Department had begun investigating it under the Equal Credit Opportunity Act and the Fair Housing Act.

Beneficial closed at $8.97 on Friday.

The equal-credit law, according to the Federal Trade Commission, "prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance."

The fair housing law, according to the federal Department of Housing and Urban Development, prohibits lenders from denying a mortgage loan, adding conditions, or charging higher payments "based on race, color, national origin, religion, sex, familial status, or handicap."

According to Beneficial's statement to shareholders, "the investigation results from a referral by the Federal Deposit Insurance Corp., the bank's primary federal regulator, and focuses on the bank's origination of home equity and residential mortgage loans."

Beneficial said it is cooperating with the investigation but added that it will be unable to do any "strategic expansion" or finish converting from its shareholder-owned "mutual" structure to a fully investor-owned structure until the investigation is over.

"The effects of a U.S. Department of Justice investigation will impede the company's results," wrote analyst David C. Peppard in a report to clients of Janney Capital Markets of Philadelphia. He has stopped recommending that customers buy the stock and cut his rating to "neutral" until the government decides what it's going to do.

"Without knowing the specifics, we would guess that an investigation of this scope could take upward of a year to 18 months," wrote Frank Schiraldi at Sandler O'Neill & Partners L.P. of New York.


Contact Joseph N. DiStefano at jdistefano@phillynews.com or 215-313-3124.

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