Seeking Alpha

Buyers balk as bank deals get pricey

  • The fast pace of smaller bank roll-ups looks set to take a pause as acquirers shy away from higher prices and instead focus on integrating recent purchases. Deal prices this year have climbed to an average of 136.8% of TBV vs. 128.7% in 2013 and 120.3% in 2012, according to SNL Financial.
  • Of course, higher stock prices make it easier to pay, with SNL's Bank & Thrift Index now trading near 170% of TBV from 145% about a year earlier.
  • Speaking at a recent conference, BankUnited (BKU +1.9%)CEO John Kanas says a strong currency is of little use if the target bank can't grow its business at the same multiple as his bank. Further, any buyer should be prepared to spend a year distracted with regulators.
  • Still on the hunt, Home BancShares (HOMB +3.3%) CEO Randy Sims takes note of frothy seller expectations, noting a number of deals where the seller has baked in 50% growth into its asking price.
  • Hancock Holdings (HBHC +3.1%) chief Carl Chaney agrees prices are rising, but so too is the quality of the books he's looking at.
  • Trustmark (TRMK +3.7%) CEO Gerard Host says growth is necessary now that the bank's passed $10B in assets and faces a whole host of new regulations and costs. "We're going to have to pay to do the deals we want to do ... It's not just about money."
  • Old National Bancorp (ONB +2.5%) CEO Bob Jones says he spends nearly 20% of his time talking to CEOs and boards of potential targets and these things take time. The recently closed purchase of Tower Financial, he says, was 10 years in the making.
  • Also presenting: BXS, FFCH, UBSH, PB
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