Insight and ideas come from many sources; today’s reflect my day at Commerce Street Capital’s 14th annual Bank Conference at the Four Seasons Resort and Club Dallas (home of the Byron Nelson golf tournament — hence today’s picture).
Commerce Street chose “The Sky’s the Limit” as this year’s theme — so I will play off of the investment banking firm’s message and keep my takeaways at a 30,000 foot level:
- Dory Wiley, the President & CEO at Commerce Street Holdings, opined that while community banks have great insight into local economies, the elephant in the room that will help or hurt financial institutions are macro-level U.S. economic issues… which are in turn influenced by world issues. As he shared, indications are 2016 will be volatile based upon weakness in the U.S & world economy and various issues of world political instability.
- The stock market’s volatility traces to global and political events, which, in combination with slow earnings growth, puts the year’s return at potentially just 3% to 5%. But for bank stocks, Dory and his team see the potential to outperform the market due to current earnings trends.
- Sticking with the stock market, when it comes to bank IPOs, I’m hearing that bank offerings could open up gradually with rising rates and proven earnings growth.
- In terms of earning trends, an interesting reminder that the Southwest has outpaced and continues to outpace the rest of the U.S. consistently in terms of ROAA and ROAE.
- C.K. Lee, Managing Director at Commerce Street Capital, noted that the number of months between the past four U.S. recessions averages out to 95 months. 81 months have passed since the Great Recession and credit crisis, with GDP Growth Rate showing “signs of resistance.”
- Specific to bank M&A, 2015 accumulated $26.6B in deal value compared to $18.8B in 2014. So far, 2016 has seen $6.6B in announcements.
- When it comes to proverbial ‘Merger of Equal’ opportunities, the numbers typically make sense — but when it comes to social issues, there is always a struggle. Still, these types of deals (regardless of what you call it) can solve for strategy and succession.
Finally, the idea that pricing is often a deal-breaker in bank M&A came up in several presentations. As you can see in this short video of Dory Wiley that recently ran on BankDirector.com, while pricing likely won’t rise in 2016, some banks will be better positioned for the best price and, more importantly, the best deal.
Al Dominick is the President & CEO of Bank Director, a privately held media & publishing company designed around strategically important business issues that a CEO, executive and/or board member(s) need to know — and be prepared to address. An information resource to the financial community since 1991, the company publishes Bank Director magazine every month, host major industry conferences like “Acquire or Be Acquired,” conducts board-level research, provides board education & training programs, runs BankDirector.com… and recently launched FinXTech.