US re­gional banks pre­par­ing for con­sol­i­da­tion as han­gover from fi­nan­cial cri­sis

The Pak Banker - - Company& -

NEW YORK: US re­gional banks are pre­par­ing for con­sol­i­da­tion as the han­gover from the fi­nan­cial cri­sis and the slug­gish eco­nomic re­cov­ery put pres­sure on un­der­per­form­ing len­ders to raise cap­i­tal or sell to a ri­val.

Bankers and their ad­vis­ers say the next two years could wit­ness sev­eral merg­ers among the 7,000-plus banks that make up the back­bone of the US bank­ing sys­tem.

Mar­shall & Ilsey, a trou­bled mid-western lender, agreed to a $4.1bn all-stock takeover by Bank of Mon­treal, a Cana­dian bank that avoided large losses dur­ing the cri­sis.

An­a­lysts say that this type of deal be­tween strug­gling lo­cal len­ders and health­ier, big­ger com­peti­tors could be a tem­plate for fu­ture takeovers.

"We ex­pect a wave of bank con­sol­i­da­tion to emerge within the next 12-18 months af­ter a dearth of deals dur­ing and im­me­di­ately af­ter the fi­nan­cial cri­sis," wrote Christo­pher McGratty, at Keefe, Bruyette & Woods, in a note to clients.

With the "big three" na­tional banks - JPMor­gan Chase, Bank of Amer­ica and Wells Fargo - still di­gest­ing the large ac­qui­si­tions made dur­ing the turmoil, buy­ers are likely to be large re­gional play­ers with solid bal­ance sheets and ro­bust earn­ings.

KBW an­a­lysts said banks such as Pitts­burgh-based PNC, US Ban­corp, the fifth-largest com­mer­cial bank in the US, and BB&T, a North Carolina lender, were among the com­pa­nies that could hit the takeover trail to boost prof­its.

Cana­dian banks such as BMO and TD Bank Fi­nan­cial Group could also be among the ac­quir­ers.

Bankers said po­ten­tial tar­gets in­cluded banks whose re­cov­ery from the cri­sis has been slow be­cause of their ex­po­sure to soured mort­gages and com­mer­cial real es­tate loans. Among the pos­si­ble sell­ers, in­dus­try ex­perts named Re­gions Fi­nan­cial Cor­po­ra­tion, a loss-mak­ing lender with more than $130bn in as­sets and about 1,800 branches in the south and mid­west of the US; Synovus, a smaller bank with ex­po­sure to the trou­bled real es­tate mar­kets of Ge­or­gia and Florida; and At­lanta-based SunTrust.

SunTrust and Re­gions are among the largest re­main­ing re­cip­i­ents of govern­ment aid, with $4.9bn and $3.5bn out­stand­ing un­der the Trou­bled As­set Re­lief Pro­gramme. The two are part of a group of banks un­der­go­ing " stress tests" by the Fed­eral Re­serve to de­ter­mine whether they are healthy enough to re­pay Tarp.

US banks have of­ten been a fer­tile source of deals. De­spite a raft of takeovers that helped cre­ate to­day's fi­nan­cial pow­er­houses such as BofA, JPMor­gan and Cit­i­group, the in­dus­try re­mains frag­mented.

Bank deals slowed to a crawl in 2008 as the cri­sis set in, with govern­ment-as­sisted takeovers of fail­ing len­ders the only source of ac­tiv­ity. But as the worst of the down­turn re­ceded, many banks re­built their bal­ance sheets and churned out higher prof­its. Their re­cov­ery has stood in stark re­lief to some banks still reel­ing from loan losses and tepid fee in­come. -PB News

LA­HORE: For­mer Prime Min­is­ter & PML (N) Quaid Muham­mad Nawaz Sharif holds a meet­ing with for­mer chief min­is­ter Sindh and for­mer PPP leader Mum­taz Ali Bhutoo. -On­line

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