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Many have argued that competitive pressures and increased regulatory costs will force a wave of consolidation in the banking industry. On Thursday, a prominent banker made a stark prediction about how many institutions will survive the next decade.
May 5 -
Put two ailing banks together and conventional wisdom dictates you might have twice the problems. You might also have a very attractive target for private equity.
April 27 -
Investors are carefully following the industry news and, perhaps incorrectly, investing in the target company as a speculative play, as opposed to investing in the acquirer.
April 18 -
In 26 metropolitan statistical areas, branches accounting for more than 10% of market deposits were operated by institutions that agreed to sell or failed since July 1.
April 12 -
When two tiny banks merge to form a slightly less tiny bank, which institution really reaps the efficiencies: the merged entity — or a larger acquirer down the road?
March 28
Call it a mismatch in expectations.
Though analysts and investment bankers keep predicting that a wave of bank consolidation is coming, bankers themselves say that there won't be much activity until sellers get real about their asking prices.
Ed Wehmer, the president and chief executive at Wintrust Financial Corp., said he's walked away from several potential deals because he believes sellers are not being honest with themselves about the quality of their loan portfolios. He compared what he's seeing in the marketplace to Bruce Willis' character in the movie "The Sixth Sense."
"They're dead and they don't even know it," Wehmer said Thursday in a panel discussion at an investor conference in Boston hosted by RBC Capital Markets.
In a separate panel on Friday, Raymond Davis, the chairman president and CEO at Umpqua Holdings Corp. in Portland, Ore., agreed that the biggest impediment to open-bank deals right now is that too many sellers aren't sure what problems lurk in their own loan portfolios, and that scares off potential buyers.
"If you quiz them on their loan portfolios, ask them the percentage of the markdowns on their nonperforming assets and they say they don't know, that's troublesome," Davis said.
Speaking on the same panel, BankUnited Inc. CEO John Kanas said one way to bring sellers' expectations in line with what buyers are willing to pay is for bankers, analysts and investment bankers to stop talking about the much-anticipated, but-yet-to-materialize wave of bank consolidation.
"The more that we say, the higher the prices go, and the less consolidation we'll see," said Kanas.
Kanas, whose bank is a reincarnation of a failed bank, said he'd like to see the Federal Deposit Insurance Corp. play a more central role in consolidating the industry by being even more aggressive in closing troubled banks. Though more than three-dozen banks have failed far this year, Kanas said he believes the FDIC is still being too lenient on some weak banks in hopes that buyers will emerge for them.
"There should be massive consolidation, but we need a catalyst," Kanas said. "If it's not the regulators, I'm not sure what it is."
