“42% Premium Paid In Whitney (WTNY) Acquisition Ranked 117 Out Of The Last 150 Big M And A Deals Since 1990; Research ...” |
| Posted: 11 Feb 2011 07:42 AM PST On Friday February 11, 2011, 10:42 am EST 67 WALL STREET, New York - February 11, 2011 - The Wall Street Transcript has just published its Southern and Midwestern Banks Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online. Topics covered: Regulatory Obstacles and Fee Income Replacement - Rise of Commercial and Industrial Lending - Increased Traditional M&A Deals - Dividend Stock Rally Companies include: Associated Banc-Corp (ASBC); BB&T (BBT); BancorpSouth (BXS); Bank of America (BAC); Bank of Kentucky Financial (BKYF); and many more. In the following brief excerpt from the Regional Banking Special Report, expert analysts and company executives discuss the outlook for the sector and for investors. Michael Rose joined Raymond James & Associates, Inc., in 2005 as a Research Associate covering the banking sector, and he became an Analyst in 2008. Previously, Mr. Rose was a Research Associate covering small-cap banks at Bear Stearns. Mr. Rose began his career at Sanford C. Bernstein & Co., Inc., where he focused on regional banks. He graduated from Babson College, where he received a B.S. in finance. TWST: You have a very positive outlook for 2011. Would you tell us about the factors that have bolstered your confidence? Mr. Rose: Yes, that is correct. As we wrote, our outlook for the sector is positive with a greater emphasis on the money center banks. In our view, it appears investors are coming around to the sector, given fairly attractive valuations coupled with greater confidence in the economic recovery. Overall, we believe that the sector is still somewhat underowned by institutional investors. Typically, we believe banks tend to be in either an overbought or oversold position. It is our view they have been in an oversold position for at least the past few months. Headline risk largely drove investors from the sector despite attractive valuations. This was evidenced in the period from April through August last year, where bank stocks generally sold off. Now I would point out that the sell-off followed strong market leadership from the November 2009 period through April. Fears about a double-dip recession and some of the "crisis" issues, including mortgage put-backs, the credit cycle, commercial real estate, etc., were growing louder.However, as the year progressed we became increasingly bullish because the valuations again became very compelling. Overall, our view is that we are through most of those crisis issues and even if we are not through them completely, we can quantify the earnings impact with some degree of certainty. I think this, combined with a pickup in M And A activity and with banks starting to return capital to shareholders, are very positive signs. Jamie Dimon was recently on CNBC and talked about raising the dividend in the second quarter, and I think that's a sign of things to come as we move from building capital to actually returning it back to shareholders. So all those things, along with improving credit quality, bodes well for sector performance this year. TWST: It seems pretty clear that we are going to continue to see plenty of M And A in this space. What is the impact for shareholders from this continued sector consolidation? Mr. Rose: I think generally in this cycle it's going to benefit investors to own the acquirers in many cases. Completing a strategic acquisition in the near future for a relatively attractive price could prove very accretive once we do get into a more normalized operating environment. I think the banks that will benefit will be those that take a first-mover approach in the consolidation cycle and buy a quality institution, or one that maybe once was a quality institution and could again be a quality institution. Partnering up has a lot of benefits. And one transaction that happened recently in my region that I would point to is Hancock's (HBHC) acquisition of Whitney (WTNY). While I certainly do not give the transaction completely glowing remarks, I think there are a lot of positive things you could draw from it. I think the premium that they pay jumps out to a lot of people, but I ran a screen after the deal was announced that looked to the 150 largest announced M And A transactions going back to 1990. And of those 150 transactions ranked by deal value, the premium that Hancock paid for Whitney was about 1.1 times book value. That ranked 117 out of 150. So by historical context, it's not that expensive, but certainly the 42% premium that they paid relative to Whitney's price jumped out at a lot of people. I know there are certainly some concerns about the marks they took on Whitney's loan portfolio, but what I would say is that I think a year or two from now, when we are in a more normalized operating environment, that merger has a lot of very positive potential benefits. I think the core deposit franchise that Whitney had built over a very long period of time becomes increasingly valuable once the Fed begins to increase interest rates. We can debate whether it's 2011 or 2012 or 2013 - it's going to happen at some point - rates will go up. And those core deposits, those non-interest bearing deposits, become increasingly valuable as the yield curve steepens. And second, I think Whitney did have some underwriting issues in their portfolio. The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online . The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations. For Information on subscribing to The Wall Street Transcript, please call 800/246-7673 Follow Yahoo! Finance on ; become a fan on Facebook. This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
| You are subscribed to email updates from Content Keyword RSS To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
0 comments:
Post a Comment