BRENTWOOD, TENN., August 13, 2013 – Bank Director has published its first mid-year M&A Trend Report, which finds that industry consolidation is slow as bank failures have tapered off and as megabanks are no longer doing big acquisitions.
Still, more banks are acquiring healthy banks in the hopes of driving growth and earnings in the years ahead, said investment bankers and attorneys interviewed for this report. They predict slow but increasing consolidation in the banking world as a higher regulatory burden encourages some banks to sell, as slow loan growth encourages M&A as a way to grow earnings, and as rising bank stock values allow acquirers to offer better prices.
Deal volume and aggregate deal values slipped a little bit in the first six months of the year compared to the same time period a year ago. Pricing remained flat. However, the biggest deal of the year was announced in July, when PacWest Bancorp agreed to buy fellow Los Angeles-based bank CapitalSource Inc., in a stock and cash transaction worth $2.4 billion.
Other trends in M&A include:
*Southwest banks are commanding the best prices, at a median 138 percent price to tangible book value in the second quarter of 2013, compared to the Southeast, which has the lowest pricing at 94.5 percent.
*Problems with government regulations are hurting some deals. Buffalo, New York-based M&T Bank Corp. announced in April a delay of its purchase of Hudson City Bancorp amid regulatory questions about M&T’s anti-money laundering program. “We are in a bit of a mini-reign of terror when it comes to regulatory compliance matters, particularly with respect to BSA [Bank Secrecy Act] and AML [anti-money laundering] on the one hand, and consumer compliance on the other,’’ said John Gorman, a partner at Luse Gorman law firm in Washington, D.C.
*Regulators finalized Basel III capital rules this summer for banks, removing uncertainty about how much capital banks would need following an acquisition. “We would be in a board room looking at a potential acquisition, and half of the board would say, ‘that’s plenty [of capital],’ and the other half would say, ‘that’s not enough,’ because the regulations weren’t clear,’’ said Michael Mayes, a New-York based managing director at St. Petersburg, Florida-based investment banking firm Raymond James.
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