Magazine article Mortgage Banking

More Bank M&As Likely This Year, PWC Says

Magazine article Mortgage Banking

More Bank M&As Likely This Year, PWC Says

Article excerpt

Growing confidence in the economy, deep-pocket investors and pent-up deal demand will spur more merger and acquisition deals in the banking industry this year, said Pricewaterhouse Coopers LLP (PwC), New York.

Financial services merger and acquisition deals increased to $50.9 billion last year from $36.1 billion in 2009--nearly one-third of the $153.2 billion announced in 2008, PwC said. However, while 840 deals were announced last year, compared with 613 deals in 2009, values were disclosed for 267 and 175 of the deals in 2010 and 2009, respectively.

"After years of focus on recovery, retrenchment and rebuilding balance sheets, the mindset of financial services firms is shifting to a more aggressive search for growth and competitive advantage," said John Marra, transaction services and financial services leader at PwC US.

Bank transactions assisted by the Federal Deposit Insurance Corporation increased last year, but institutions were smaller in size than in 2009 and "recent activity indicates that the FDIC is offering less-favorable deal terms and may be providing banks with more time to raise additional capital or seek suitable buyers/' PwC said in its Positioning for Growth: 2011 U.S. Financial Services Insights report.

The report noted that regulatory restrictions surrounding the permissibility and pricing of certain products and fees will tighten margins and force small and medium-sized banks to seek consolidation opportunities in an effort to build scale and derive value from "synergies."

"Recent and prospective regulatory changes will drive small and medium-sized banks to seek scale through acquisitions; creating significant M&A [mergers and acquisition) opportunities in 2011," PwC said.

The Volcker Rule, for example, which restricts banks in proprietary trading and certain investment management activities by banks, will likely drive M&A activity in the asset-management space as well, and large banks will consider divestitures to avoid restrictions imposed by the pending legislation. …

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