BRENTWOOD, TENN., November 29, 2016 – Forty-six percent of bank executives and directors responding to Bank Director’s 2017 Bank M&A Survey indicate that their institution is likely or very likely to purchase another bank by the end of 2017. However, this expectation co-exists with a more pessimistic outlook for the bank M&A market. Just 45 percent believe that today’s environment is more favorable for deals, down 17 points from last year’s survey.
“Even though deal volume is down, we’ve seen some interesting combinations this year,” says Al Dominick, CEO of Bank Director. “M&A remains a primary catalyst for the strategic plans of many banks.”
The 2017 Bank M&A Survey is sponsored by Crowe Horwath LLP, which assisted in designing the survey and interpreting the results, and was conducted in August and September 2016, before the U.S. presidential election.
“With this year’s survey, we were able to gather information from respondents on not only the bank M&A market, but also the economy and the potential impact of the U.S. presidential election on bank M&A,” says Rick Childs, partner at Crowe Horwath LLP. “Respondents were also able to provide insight on the factors they value most highly in banks they are pursuing or have pursued in the past. Good markets and good lending teams are the keys for many acquirers, and are the starting point for their analysis of potential bank partners.”
Survey respondents also reveal mixed views on the economy, with 31 percent predicting an economic downturn or recession in the U.S. by the end of 2017. One-third are unsure.
Bank Director surveyed online 206 chief executive officers, chief financial officers, chairmen and directors of U.S. banks in August and September. Fifty-eight percent of survey respondents who have made a past acquisition reveal that attractive markets are the most important attribute of a potential acquisition target. Lending teams are also highly prized: Forty-one percent of respondents say that the opportunity to acquire lending talent is highly important, which can be attributed to a competitive environment for commercial lenders.
Other key findings include:
- Just one-quarter of respondents say their bank is likely or very likely to purchase a branch or multiple branches by the end of 2017. When asked about the attractiveness of branch acquisitions compared to five years ago, attitudes are mixed: One-third believe that buying a branch is more attractive than five years ago. Twenty-eight percent believe that branch acquisitions are less attractive.
- Twenty-five percent report that they’re open to selling their institution, considering a sale or actively seeking an acquirer. Of these potential sellers, 54 percent cite regulatory costs as the reason they would sell the bank, followed by shareholder demand for liquidity (48 percent) and limited growth opportunities (39 percent).
- Price, at 38 percent, followed by cultural compatibility, at 26 percent, remain the two greatest challenges faced by boards as they consider potential acquisitions. Price is also identified as the top reason that potential buyers and sellers have walked away from a deal in the past three years.
- Forty-five percent report that they are seeing deterioration in loan underwriting standards within the industry, leading to possible credit quality issues in the future. Concerns about the quality of loan underwriting standards at the target institution caused 28 percent to walk away from a potential acquisition.
- Eighty-eight percent believe that interest rates will rise by the end of 2017. Most respondents, at 46 percent, expect a modest increase of less than half a percent.
About Bank Director
Since 1991, Bank Director has served as a leading information resource for the directors and officers of financial institutions. Through its print and digital editions of Bank Director magazine, executive-level research, annual conferences and its website, BankDirector.com, Bank Director reaches the leaders of the institutions that comprise America’s banking industry. Bank Director is headquartered in Brentwood, Tennessee.
About Crowe Horwath LLP
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting, and technology firms in the United States. Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe is recognized by many organizations as one of the country’s best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in more than 120 countries around the world.
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