2019 Bank M&A Activity

Bank stocks came under pressure in mid-2019, erasing many of the gains from the first half of the year. The Fed responded to recession fears by cutting interest rates. Bank stocks enjoyed a rally in late 2019, jumping close to 30%, and the potential for long-term rate increases going forward may lift these stocks in 2020 as well. 

Anton Schutz, a senior portfolio manager at Mendon Capital Advisors, believes there is investor support for smartly priced bank M&A transactions. According to S&P Global Market Intelligence, he said, “Smaller acquirers remain in the optimal position because they can evaluate a larger pool of potential sellers and have the option to sell to another institution.” 
Many smaller banks are interested in selling because of succession issues, the pressure to expend human and financial capital on technology to remain competitive with nonbanks and other financial service providers, thinning net interest margins, and the potential for a recession or significant regulatory changes, such as CECL and the new FASB lease accounting standard.
 
In 2019: 
 
  • 271 deals (the most since 2015) worth more than $57 billion were announced, a 5% increase over the 259 deals reported in 2018. 
  • Much of this year-over-year jump in deal valuations is due to the $30.8 billion December merger of BB&T Corp. and SunTrust Banks Inc. that created Truist Financial, the largest deal in more than a decade.
  • The median deal value-to-tangible common equity ratio for M&A transactions announced in 2019 was 155.7%, down from 171.2% in the year-ago period. This was largely due to mergers of equals and a large number of smaller transactions.
  • First Horizon National Corp.'s transaction with IBERIABANK Corp. for $3.92 billion was announced in November, the second-largest deal of 2019.
  • Only 24 deals involved sellers with more than $1 billion in assets; 53% involved sellers with less than $250 million in assets.
  • Illinois and Texas each had 22 sellers, 16% of total transactions. Wisconsin, Florida and Minnesota round out the top five states with the most activity.

Source: S&P Global Market Intelligence, American Banker

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