- Nationwide consolidation in the banking space will continue; at least, that is my sense based on conversations and presentations at Crowe Horwath’s Bank Leadership and Profitability Improvement Conference.
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So much of this morning was spent talking about growth through mergers and acquisitions (M&A) that I couldn’t help but flash back to January’s Acquire or Be Acquired conference. Thematically, I went into that event expecting the unexpected. Given this morning’s presentations on growing one’s bank, I believe that mindset still holds water.
For example, Tom Michaud, the president and CEO of Keefe, Bruyette & Woods, described 2016 and 2017 as one bumpy ride. From recession fears to lower-for-longer rates, the initial euphoria after the presidential election (at least in terms of stock prices, which went up 27% – 30%) to the uncertainty of regulatory relief, he reminded us of where we are coming from relative to where we might be heading. I am always curious to hear what Tom thinks about the state of banking; below, ten things I learned from him this morning:
- The interest rate outlook is a bit cloudier than it was in November;
- Regional banks have had excellent earnings per share growth relative to the overall market;
- We have an active pace of consolidation — nearly 5% of the industry is merging;
- The most prolific acquirers can buy 2, maybe 3 banks, at best each year;
- M&A deals are getting bigger — not ’97 or ’98 levels, but bigger than where they’ve been;
- Large buyers are not in the game right now — buyers $25Bn and below continue to drive M&A activity (case-in-point, 95% of total M&A deals since 2011 have buyer assets less than $25Bn);
- Buyers are completing their acquisitions in 6 months or less;
- Banks with strong tangible book value multiples are dominating M&A;
- There have been 37 bank IPOs since 2013 — and the market today is open to small bank IPOs; and
- If you’re running a bank, you better be watching (like a hawk) the FinTech charters being pursued by companies like SoFi.
Following Tom’s presentation, we doubled down on growing-the-bank type topics with a session involving Rick Childs, a partner at Crowe Horwath, Jim Ryan, the CFO at Old National Bancorp, Jim Consagra, EVP and COO at United Bancshares and Bryce Fowler, chief financial officer at Triumph Bancorp.
From pricing discipline to acquisitions of privately-held/closely-held companies, the guys made clear that “there are only so many deals out there.” They shared how boards need to determine the size they want to be, honestly assess the talent they have relative to such aspirations and determine how growth through M&A aligns with enterprise risk management positioning. Essentially, their remarks made clear that a successful merger or acquisition involves more than just finding the right match and negotiating a good deal.
As I shared with yesterday’s post, my thanks to Crowe Horwath, Stifel, Keefe Bruyette & Woods and Luse Gorman for putting together this year’s Bank Leadership and Profitability Improvement Conference at The Inn at Spanish Bay in Pebble Beach, California.