New bank M&A powerhouse leaves rivals for dead
America's new bank M&A powerhouse is leaving its rivals for dead. Regional lender BB&T's $1.8 billion swoop for National Penn Bancshares is its fourth deal in a year. The acquisition makes financial sense and is more proof the Federal Reserve supports industry tie-ups. Yet few peers are following the North Carolina-based bank's lead.
A hiatus in industry dealmaking was understandable in the years after the financial crisis. The Fed took a lot more time approving deals and started demanding improvements to risk management and anti-money laundering systems. That's why M&T's 2012 purchase of Hudson City has still not gotten the thumbs up. BB&T has shown that consolidation is back on the agenda. Assuming he secures regulatory approval for this latest deal, Chief Executive Kelly King will have added $30 billion in assets and $24 billion in deposits since this time last year. That'll leave BB&T with some $220 billion in assets.
King is not losing his discipline, either. Expected cost cuts of $65 million a year are currently worth some $400 million to shareholders, once taxed, capitalized and discounted for the two years it'll take to realize them.
That easily eclipses the $270 million premium King's bank is paying, even after folding in $100 million of merger costs. The deal also looks savvy strategically. It bumps BB&T up to fourth place by market share in Pennsylvania, the nation's sixthlargest state by population.
This all ought to be catnip to peers, whether large regional banks such as PNC and SunTrust or the likes of KeyCorp and Comerica, with less than $100 billion in assets. So far, though, only CIT has joined BB&T in hunting prey.
It may well be that several of them are on the prowl already and just a bit slower to pounce. BB&T, after all, has more experience - at least judging by its executives bragging that the bank has closed 80 deals in the past 30 years. The longer its rivals stay on the sidelines, though, the more it may look like they fear their targets, or the Fed, may reject them.