The KBW analyst team has asserted that Comerica, Zions and First Horizon stand to be acquired by more financially prosperous rivals. APossible acquirers with robust returns, such as Huntington, Fifth Third, M&T and Regions Financial, may look to expand their business by incorporating these smaller banks. Additionally, it has been suggested by the analysts that Western Alliance and Webster Financial may contemplate selling themselves.
According to KBW analysts, three regional banks are feeling the squeeze on returns and profits that may make them attractive acquisition targets for a larger rival. Christopher McGratty of KBW clarified that this group of banks with between $80 billion and $120 billion in assets has the lowest structural returns among banks with at least $10 billion in assets, creating a need to grow or face a future of struggles. Among the eight banks in this range, Comerica, Zions and First Horizon pose the most likely candidates for being bought out by a more lucrative competitor. Zions and First Horizon chose not to comment, and Comerica failed to provide a response at the time of this article. Meanwhile, McGratty suggested that Western Alliance and Webster Financial, with their above-peer returns, may choose to remain independent or to sell themselves. The remaining lenders, East West Bank, Popular Bank and New York Community Bank, possess higher returns and could become acquirers rather than targets. KBW estimated the long-term impacts of upcoming regulations on bank returns.
McGratty, in an interview last week, stated that their assessment concluded that not all banks are as lucrative as the others, and that they must take the size of the bank into consideration. In response to the downfall of three medium-sized banks this year due to increasing rates of interest and depositor withdrawals, the bank regulators have put forth a wide-ranging set of changes that extend the rules that have already been applied to the leading global banks to those with assets of no less than $100 billion, increasing their compliance and financing costs.
This year, the KBW Regional Banking Index has revealed a 21% drop in regional bank stocks. However, the sector has seen a slight uptick in recent weeks due to diminishing worries over inflation. Issues such as the potential for loan losses and new regulations and rules are still hampering the market. According to the KBW analysis, three size categories of asset-holding banks exist, and those with less than $10 billion in assets should aim to build up to at least $20 billion so as not to be negatively affected by the loss of debit card revenue. Banks with assets between $80 billion and $90 billion, such as Comerica and Zions, are subject to market pressure due to assumptions that they will soon have to face the drawbacks of a $100 billion-asset bank. On the other hand, banks that already have strong returns and larger asset amounts, such as Huntington, Fifth Third, M&T, and Regions Financial are advantaged when it comes to acquiring smaller lenders. KBW analysts downgraded the U.S. banking industry late in 2022, a few months before the regional banking crisis. The analysts at KBW have also aided in forming indexes that show the progress of the banking industry. Although banks are still waiting for definitive rules and regulations, as well as how interest rates will be affected, consolidation has been a consistent theme for the banking industry. Banks' ability to take advantage of these new rules will be what relative success many banks achieve.
Don't miss out on these stories from CNBC PRO: Follow the S&P 500's formation of a 'cup and handle' pattern and observe the potential breakout in advanceBank of America forecasts the S&P 500 will reach 5,000 in the coming year and expects a "stock picker's paradise"Morgan Stanley is upbeat about the rising AI trend and names 6 stocks to capitalize on itCheck out these Wall Street-approved Warren Buffett stocks
Kommentare