This year has already been the busiest since the financial crisis for US bank mergers; and it’s not over yet. September saw Citizens add to its already busy roster with the $149 million purchase of JMP Group, while at the other end of the scale, US Bancorp announced an $8 billion acquisition of most of MUFG Union Bank.
Earlier in the year Citizens announced the acquisitions of Investors Bancorp and HSBC’s east coast branch network and national online deposits platform, and closed its deal to buy valuation consulting firm Willamette Management Associates. Huntington Bancshares closed its $22 billion merger with TCF Financial, while M&T announced its $7.6 billion deal to buy People’s United Financial.
Small banks find that selling themselves looks like a better option than trying to slog on alone as conditions get tougher
It has been quite the rush, although one long expected as small banks find that selling themselves looks like a better option than trying to slog on alone as conditions get tougher. And while the bidding can be competitive, it is often certainty of execution that is winning out. Citizens snapped up HSBC’s branches at a deposit premium of just 2% because while its main target was an entry point into the New York metro market, it was happy to take operations in Washington DC and Florida as part of the bargain and so make the deal a much easier one for the seller.
But the next round of appointments of officials in DC – expected to be wrapped up in the coming weeks – could make that certainty of execution much harder to come by. President Joe Biden is angling for a second term for Federal Reserve chairman Jay Powell but must counter opposition from the likes of senator Elizabeth Warren, who in September called Powell “dangerous” for what she sees as his deregulatory leanings.
Tougher ride
Biden must be hoping that his other nominations are a sufficient sop to the progressives in his party. Saule Omarova, who is noted for her tough attitudes on bank oversight and cryptocurrencies, is being lined up to head the Office of the Comptroller of the Currency. Rohit Chopra is up for the job of director of the Consumer Financial Protection Bureau.
But for those regional bank chief executives still hunting for targets, there could be a bigger obstacle to their ambitions on the way. Some progressive Democrats didn’t like Biden’s choice of Janet Yellen as Treasury secretary last year, a role for which Fed governor Lael Brainard was also in the running. There are some who would prefer Brainard to replace Powell at the top of the Fed now, but Biden is thought to prefer to nominate her to succeed Randal Quarles as the Fed’s vice chair for supervision – a key role in bank supervision.
If that plays out, the US regional banks are expecting a tougher ride over M&A, however urgent they think the business case is for such deals.
“As long as the music is playing, you’ve got to get up and dance,” said Chuck Prince when he was chief executive of Citigroup back in 2007. For the moment, the US regionals are finding dance partners, but that music might stop soon.
