As capital questions clarify, the economy firms and merger activity shows new life, the healthiest banking companies have spelled out their acquisition agendas.
Some of the largest regional banking companies have already been remade by deals during the crisis (see charts), but merging remains nearly as essential to the business of banking as banking itself.
BB&T Corp. has been up-front about its ardor for Texas, where it gained a beachhead through its 2009
In a presentation in November, Chief Executive Kelly King said that the company is already building its corporate banking operation in the state organically but that it would be hard to gain ground with small businesses and retail customers without acquisitions. Potential targets with assets of $3 billion or more are BB&T's focus — much smaller deals "don't really move the needle enough to make total sense for our shareholders."
Overall, BB&T's posture on mergers has turned full circle. In the 1990s and the early part of the new century, the company grew largely by buying scores of banking companies before self-imposing a moratorium on dealmaking.
In a December presentation, King said prices had gotten too high but that "we have moved back to where the prices make sense."
PNC Financial Services Group Inc. has said that density is crucial to its strategy: It believes that a dominant share of a regional market cements the power of its brand and enhances its ability to make sales across its product lines.
"If you're one or two in a small market, you can do extremely well," Richard Johnson, the company's chief financial officer, said in a presentation in November. "And if you're in a larger market, you probably want to be one, two or three because that's where most of the money is made."
But PNC is among the companies that have been the most radically transformed during the crisis — its $6.1 billion purchase of National City Corp. at the end of 2008 doubled its assets — and, in a December presentation, CEO James Rohr said, "There's nothing of that size out there again." Fill-in deals in which PNC can slash 40% or 50% of expenses are likeliest, he said.
Johnson said, "There is no question that we are interested in some of our markets to try to move from being a fifth or sixth player in the market to being one, two or three."
Having concluded that "it's a buyer's market like I've never seen before," U.S. Bancorp CEO Richard Davis has projected nonchalance when describing his company's M&A intentions.
"If there's something that doesn't meet our hurdle, we'll let it go," he said in a December presentation. "If there's something we haven't found yet that we like, we'll find it. But what you see today is pretty much what you'll see for a while unless something changes."
Davis said U.S. Bancorp aims to resume its precrisis practice of returning 75% to 80% of earnings to shareholders through dividends and share buybacks and using the other 20% to build the business, including through acquisitions.
But he predicted that weak institutions would typically take their time coming to terms with dim growth prospects and that this would hold back merger activity. "They either decide to gut it through, or they raise their hand or pick up the phone and give a few of us a call," he said. "Doesn't matter to me. We'll wait, and we won't go after anybody we don't need to."
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