What pressure Truist? Regionals insist they are in no rush to merge
BB & T-SunTrust’s close proved that large bank mergers can be done in the current regulatory environment, but senior executives at several large regional banks did not hint on Tuesday that they plan to explore similar deals or to feel the pressure to do so.
Acquisitions of entire banks are disruptive, costly and can distract from a good strategic plan, officials from Citizens Financial Group, Regions Financial and KeyCorp said at a Goldman Sachs conference in New York on Tuesday. They were answering questions about their M&A outlook just days after BB&T and SunTrust finished their merger, forming the $ 470 billion Truist Financial asset to be based in Charlotte, NC
“The degree of difficulty with bank mergers and acquisitions, I think, is sometimes underestimated,” said Chris Gorman, president and chief operating officer of Cleveland-based Key. Gorman to succeed CEO Beth Mooney when she retires in May; he has been widely recognized as a leader in the integration of the First Niagara bank in Buffalo, NY, which Key purchased in 2016.
The announcement in February of the merger of BB&T and SunTrust to form America’s sixth bank sparked speculation that a wave of other mergers could follow. But while there have been a number of deals in the intervening months involving community or mid-sized banks, large regions have shown little interest in combining to preserve a competitive advantage.
Recent low, no-premium deals – like First Horizon-Iberiabank – may have changed the math a bit for regions with $ 129 billion in assets, conceded President and CEO John Turner, reiterating the comments he made last month. But Turner said the Birmingham, Alabama bank would likely be best served by focusing primarily on its strategic plan. That, in turn, could help boost stocks in the regions and put them in a better position to buy another bank later, he said.
“Our objective must be the execution of our plan, the improvement of what we do, the densification of our activities and our markets. [where] we have a current presence and continue to grow our business, ”said Turner. “We believe there is a tremendous opportunity to improve just through better execution and continuous improvement, and that’s really our goal. ”
Non-bank transactions are another story. Regional leaders have indicated that they may be interested in a non-bank transaction, such as a wealth management company or mortgage management rights. Key’s Gorman discussed the non-bank acquisitions Key has already made, such as the Laurel Road digital student lender, specializing in the refinancing of student loans for doctors and dentists.
Citizens President and CEO Bruce Van Saun said the bank with $ 164.4 billion in assets may be interested in buying another mergers and acquisitions advisory firm that adds revenue fees. Citizens has completed a number of non-bank acquisitions over the past 18 months, including an M&A consultancy shop in Atlanta, a wealth management company in New York and a mortgage service company in Tennessee.
But non-bank arrangements must always be adapted, warned Van Saun.
“Culturally you want to have people who appreciate what it means to come to our platform and they want to have a long term career in it and benefit their clients from the extra things that they can get by being a part of Citizens.” , did he declare. “A lot of people who are interested in selling their business, they just want the best dollar.”
Van Saun also highlighted citizens’ investments in technology. While he wouldn’t rule out a banking deal entirely, if exactly the right opportunity presented itself, he said Providence Bank, RI, just has other priorities right now.
“We are in a time of massive change in the banking industry: customer expectations are changing, the way technology exists and offers is changing rapidly,” said Van Saun. “I think if you get involved in a major merger of equals it can cause inward focus to a point where you really have to focus on the outside. I’m a little worried about this from a timing point of view.
Later that day Curt Farmer, CEO of Comerica in Dallas, echoed the remarks of other regional leaders in responding to speculation that the $ 3.1 billion deal announced on Monday between Texas Capital Bancshares in Dallas and Independent Bank Group in McKinney, Texas, would trigger a trading frenzy in the state.
“Nothing has really changed” for Comerica, with $ 71.7 billion in assets, which focuses on organic growth, Farmer said. Transactions like its acquisition of Sterling Bancshares in 2011 “are probably rare”.
Big banks also had questions about mergers and acquisitions at the conference.
JPMorgan Chase could consider acquiring or partnering with a tech company, CFO Jennifer Piepszak said.
Noting that JPMorgan “obviously cannot buy another depository institution,” Goldman Sachs analyst Richard Ramsden asked if JPMorgan might consider acquiring a technology-related company.
Piepszak replied that JPMorgan’s July agreement for health care payment provider InstaMed offers an example of the type of acquisition that might work.
“Wholesale payments, I think, are a good example,” she said. “InstaMed… helps us close the gap in healthcare… which is really helping us accelerate our growth in small businesses in wholesale payments. “
When JPMorgan executives analyze the company’s shortcomings, they wonder whether it should create the line of business on its own, make an acquisition or form a partnership, Piepszak said.
“In some cases it just makes more sense, for a number of different reasons, to make an acquisition or a partner,” Piepszak said.
Andy Peters and Jon Prior contributed to this article.