Magazine article American Banker

Foreign Asset Purges Could Be Bank M&A's Silver Lining

Magazine article American Banker

Foreign Asset Purges Could Be Bank M&A's Silver Lining

Article excerpt

Byline: Matthew Monks

Cloudy, with a chance of rainmaking from foreign banks shedding assets.

That is the forecast for bank mergers next year, dealmakers from Deutsche Bank, RBC Capital Markets and other M&A advisory outfits said Wednesday. They spoke at a banking conference in New York sponsored by Mergermarket Ltd.

The logjam in normal bank-to-bank mergers will not break until Europe solves its debt woes and U.S. regulators implement most of the banking reforms enacted last year, they said. Those things could happen next month, next year or sometime in the next decade.

One thing they are more certain of is a ripening market for assets that banks in Spain, England, Ireland and France need to unload to fortify their balance sheets. Stateside banks are anxious to invest their excess cash, but either cannot or do not want to do it buying other banks right now.

"We expect cross-border [deal activity} to continue going forward," said Eric Heaton, managing director and head of Deutsche Bank's financial institutions group in the Americas.

Certain European banks may "back off" from investing in the states, he said, while spinning off more U.S. assets because of difficulty obtaining sufficient funding. Look for more sales of assets that do not require a lot of capital, and thus can be sold at a capital gain, he said.

There are decent returns to be had buying performing loans. The returns from investing in a brick-and-mortar bank franchise are highly unpredictable. That is making foreign assets more enticing to the biggest banks, said Jerry Wiant, managing director and co-head of RBC Capital Markets' financial institutions group.

"To double down and expand your branch network in this environment, you've got to have a lot of conviction," Wiant said.

Wells Fargo & Co. …

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