Bank M&A

What’s For Sale?

Banks are shedding non-core subsidiaries to raise capital and drive growth. Here’s what they’re selling.

Laura Alix
Director of Research

Bank M&A slowed to a crawl last year. Along with a diminished appetite for acquiring other institutions, directors and executives responding to Bank Director’s 2024 Bank M&A Survey also showed less interest in nonbank M&A: Just 13% said their organization was likely to buy a nondepository line of business, down from a quarter a year earlier. 

Banks may be unlikely to buy these types of businesses, but selling them to interested buyers outside of the banking industry could be a different matter. Acquirers willing to pay, combined with banks’ desire to raise capital and maintain liquidity, have played a role in accelerating sales of those subsidiary businesses.   

“Banks are evaluating, ‘Where’s the best return on my capital?’ And they’re deciding it’s not necessarily in those [non-core] industries,” says Patrick Vernon, senior manager, advisory services with Crowe LLP, which sponsored the survey. “We’re seeing a lot of nonbanks picking up those operations.” 

Insurance subsidiaries are one of the key business lines that banks are selling off. In February 2023, $535 billion Truist Financial Corp. in Charlotte, North Carolina, sold 20% of its insurance unit to the private equity firm Stone Point Capital for $1.95 billion, leading investors to question whether the remaining 80% could be for sale in the near future. 

In September, Boston-based Eastern Bankshares, with $21 billion in assets, sold its insurance unit to the insurance brokerage Arthur J. Gallagher & Co. The Boston-based bank immediately deployed the $510 million in proceeds to fund its acquisition of $5.5 billion Cambridge Bancorp in Cambridge, Massachusetts. 

Eastern wasn’t the only bank selling to Arthur J. Gallagher. Its acquisitions in 2023 included insurance units from $2 billion Evans Bancorp, in Williamsville, New York, and $48.5 billion Cadence Bank, in Tupelo, Mississippi.  

World Insurance Associates, another insurance brokerage, has also been an active acquirer, picking up the insurance subsidiary of $1.4 billion CB Financial Services in Carmichaels, Pennsylvania for $30.5 million. The bank also noted other benefits to the sale, such as a 16.8% improvement in its tangible book value per share and an 160-basis point increase in its risk-based capital ratio, to 15.51%.  

In years past, banks picked up insurance subsidiaries as a means of diversifying their business and generating additional fee income during a prolonged low interest rate environment. 

“It was at a time where it was pretty beneficial to get into those industries. Premiums were nice. Rates were still low, so capital was cheap,” Vernon says. “We’re in a different situation now, where we do need to think about liquidity, and we need to think about how we’re maintaining return and getting capital.” 

Additionally, banks may have found that it can be difficult to cross-sell insurance products to their customers, says Brian Ambrosia, a director and member of the financial advisory team at MarshBerry. He adds that banks typically cross sell insurance products to only about 1% of their customer base.  

“The cross sell between banking and insurance is actually harder than it was previously thought, particularly cross selling those commercial banking clients that make for very solid middle market accounts,” Ambrosia says. 

Similar dynamics could drive banks to sell other types of non-core subsidiary businesses. 

Vernon notes increased interest among banks in selling wealth management divisions. “We’ve seen those multiples jump to four to five times,” he says. “If you’re a bank sitting on those operations and looking for a return or looking how you’re going to deploy your capital, it makes an attractive exit strategy if it’s not something you want to maintain long term.” 

But mortgage lending lacks the same appeal. Muted loan activity amid higher interest rates has translated into lower valuations for those businesses, says Kevin O’Keefe, managing director in the financial services group at Piper Sandler & Co. Would-be sellers may wait for mortgage activity to pick up before considering a sale. 

“I do think once you see some resurgence in the growth of the mortgage business within banks, you may see some of those for sale at levels that are then acceptable to the bank sellers,” he says. 

O’Keefe believes the next year could bring more sales that generate capital to fuel organic growth or acquisitions, like Eastern Bank.

“Raising capital can be expensive, depending on the multiples and depending on the coupons on debt,” he says. “If you already have an embedded piece of capital that’s not being valued correctly, [you can] take that capital and use it to support those other growth plans.”


Laura Alix

Director of Research

Laura Alix is the Director of Research at Bank Director, where she collaborates on in-depth strategic research for bank directors and senior executives, including Bank Director’s annual surveys. She also writes for and edits online video content. Laura is particularly interested in workforce recruitment and retention strategies, and environmental, social and governance issues facing the banking industry. Previously, she covered national and regional banks for American Banker, and before that, she covered community banks for Banker & Tradesman and The Commercial Record. Based in Boston, she has a bachelor’s degree from the University of Connecticut and a master’s degree from CUNY Brooklyn College. You can follow her on Twitter or connect on LinkedIn.