ABA-Back in Business.
ENPNewswire-November 15, 2021--ABA-Back in Business
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Release date- 14112021 - After a slow start in the first quarter of 2021, the pace of bank deals has increased notably as easing credit concerns brought many buyers back into the fray.
Potential sellers, meanwhile, continue to face earnings headwinds as excess liquidity and low interest rates pressure net interest margins. Fundamental revenue pressures, growing comfort from buyers and desire to achieve scale to invest in technology and reduce costs should support a further rebound in bank M&A activity and lead to the highest aggregate deal value recorded since the global financial crisis in 2021 and 2022.
In late August, we projected that about 230 deals with an aggregate deal value of $63.3 billion would occur this year, which would represent the highest mark since the global financial crisis. But even that estimate of record deal activity could prove too conservative. Through Oct. 13, 166 bank deals with an aggregate deal value of $57.3 billion had surfaced.
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The projected level of banks selling in 2021 would equate to nearly 4.7 percent of U.S.-based banking institutions. Such a pace of consolidation would be slightly below the level witnessed in 2019 but roughly on par with activity seen in 2018.
We believed that aggregate deal values could stand out even more as we expect regional banks to represent a higher percentage of all targets than seen in years past. Banks with between $10 billion and $50 billion in assets have already made up a far higher concentration of sellers this year-nearly 4 percent of all targets compared to just over 1 percent between 2017 and 2020-as more institutions have sought scale to improve efficiency and allow investment in technology to keep up with shifting customer preferences to digital channels.
Through Oct. 13, 19 deals with values over $500 million had already surfaced in 2021, the highest number since the global financial crisis.
We believe regional banks will continue to make up a larger proportion of sellers when compared to prior years as they seek scale to keep up with the technology investments made by the nation's largest banks. We expect the trend to continue in 2022 and project that aggregate deal value could near $60 billion.
A number of sellers, including among the regional ranks have noted that the scale offered through transactions was attractive. Investors Bancorp...
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