New bank M&A pow­er­house leaves ri­vals for dead

The Pak Banker - - OPINION - Daniel Indiviglio

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.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.