Get Breaking Alerts on Stocks Before The Mainstream Media

Stay informed of the biggest news on stocks so you can react before 90% of retail investors.
Email address
We guarantee you to keep your privacy
Connect with us
Financial Press
:-why-the-recent-wave-of-regional-bank-mergers-is-far-from-over-—-and-you-could-profit-from-it
:-why-the-recent-wave-of-regional-bank-mergers-is-far-from-over-—-and-you-could-profit-from-it

Breaking

: Why the recent wave of regional bank mergers is far from over — and you could profit from it

Facing competition from megabanks and financial technology players, regional banks and midsize lenders find themselves in a mood to mingle in 2021.

S&P Global Market Intelligence now projects $63.3 billion in bank mergers in 2021, up from $27.8 billion in 2020 and $55 billion in 2019, according to figures released earlier this month. The $63.3 billion figure represents the largest total since the Global Financial Crisis. In 2022, S&P expects at least $60 billion in M&A bank activity.

If you’re lucky enough to own individual shares of a bank being bought, you’ll likely get a boost in share price, since acquirers typically offer a premium price to shareholders of a target company.

But even some exposure to regional banks and financial stocks have paid off for investors this year. The Financial Select SPDR ETF
XLF
is up about 27% year-to-date compared to an 18% rise in the S&P 500, as of Thursday’s close. The SPDR S&P Regional Banking ETF
KRE
has also outperformed the S&P 500 with a 21% rise thus far in 2021.

In a fresh example of consolidation in regional banks, Arkansas-based Home BancShares
HOMB
said Wednesday it agreed to fully purchase subsidiary Happy Bancshares for about $900 million in stock in a move to allow it to operate in Texas. The bank already hinted it plans to pursue more deals in the Lone Star State.

Citizens Financial Group
CFG
has been active with both big and small deals. On Sept. 8, the bank revealed a smaller, tuck-in acquisition of JMP Group LLC
JMP
for $149 million to add the smaller firm’s investment banking presence in San Francisco and New York.

See now: 14 dividend stocks from a winning value manager as the broader market hits record highs

On the larger side of M&A, you’ll likely see more deals in the vein of Citizens Financial’s $3.5 billion purchase of Investors Bancorp
ISBC
as announced in July and Huntington Bancshares
HBANInc.’s
$22 billion all-stock acquisition of Detroit-based TCF Financial Corp., said Gregory Lyons, a corporate partner and co-chair of the financial institutions group at Debevoise & Plimpton.

“It has been accelerated by the pandemic, and a desire for a bank branch in your pocket on an iPhone,” Lyons told MarketWatch. “A lot of customers haven’t walked into a bank branch for years. Regional banks are in many cases seeking economies of scale to invest in technology.”

While larger deals between publicly traded banks continue to drive M&A, smaller players are also taking part among the roughly 5,000 banks in the U.S. including small community banks.

Get Breaking Stock Alerts

Stay informed of the biggest news on stocks so you can react before 90% of retail investors.
Email address
We are Spam free & Secure 🙂

“There’s tons of M&A that’s beneath the radar,” Lyons said.

See also: Big U.S. companies to kick off post Labor Day borrowing boom

Examples of acquirers in this corner of the market include Investar Holding Corp
ISTR,
which is expected to wade back into acquisition mode after swallowing up Alabama-based lender Cheaha Financial Group Inc. earlier this year, according to analysts at Hovde Group.

Seacoast Banking Corp.
SBCF
of Florida stands out as another serial acquirer as it pursues its strategy to buy smaller banks in higher growth Florida markets, Hovde Group said.

Fintech on the payments side from players such as Venmo, Stripe, Square, and PayPal are less regulated and they’re taking business away from banks. Non-bank lenders such as Rocket Mortgage are drawing mortgage business away as well.

“I’d be surprised if there’s not in the next year or to at least two or three significant deals in the regional bank space, including the U.S. bank subsidiaries of foreign banks from Canada, Japan and Europe,” Lyons said.

However, tie-ups between megabanks such as J.P. Morgan Chase
JPM,
Citigroup Inc.
C,
and Bank of America Corp.
BAC
remain unlikely given deal hurdle related to antitrust and central bank guidelines.

Even apart from the antitrust rules, it would hard for a large bank merger to take place between globally systemically important banks (GSIBs). The U.S. Federal Reserve would require an economic analysis of risks as spelled out in Dodd Frank – a difficult hurdle to clear, said Ted Hassi, a partner at Debevoise focused on antitrust issues.

However, larger regional bank tie-ups remain in the table.

“I would not tell a big bank, that you can’t get a deal done,” Hassi said. “You have to approach it with care. Any big merger will be met with some skepticism and a lot of the blocking and tackling will be necessary to get the deals done.”


SOURCE: S&P


“Banks are feeling greater pressure to merge due to the challenging earnings environment and dramatic changes in customer behavior during the pandemic,” said Nathan Stovall, principal analyst at S&P, in a statement. “More banks could pursue to sales as they see some of their strong peers decide to partner with other institutions.

S&P Global Market Intelligence expects 229 deals to take place in 2021, with 135 M&A deals surfacing in the second half of 2021 and 70 deals in the fourth quarter alone. Regional banks will continue to comprise a larger portion of sellers compared to prior years.

Written By

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

Breaking

Treasury yields rose across the board on Monday, with the 30-year long bond hovering near the psychologically significant level of 2% and the benchmark...

Breaking

Amazon.com Inc.’s plans for higher wages and a bigger workforce will put pressure on the company’s profit and EBIT, Morgan Stanley says, driving down...

Breaking

Bank stocks have had a good run in 2021, but they still lag behind the broader market’s recovery since the pandemic doldrums of 2020....

Breaking

As Washington teeters closer to a possible government shutdown at midnight Thursday, here’s why the status of the nation’s debt ceiling may ignite more...

Get Breaking Stock Alerts

Stay informed of the biggest news on stocks so you can react before 90% of retail investors.
Email address
We are Spam free & Secure :)

Get Breaking Stock Alerts

Email address

Get Breaking Stock Alerts

Stay informed of the biggest news on stocks so you can react before 90% of retail investors.
Email address