“2012 Bank Consolidation Merger Wave Predicted By Experienced Equity Analyst: An Exclusive Interview With Edward ...” |
| Posted: 09 Mar 2011 08:53 AM PST On Wednesday March 9, 2011, 11:53 am EST 67 WALL STREET, New York - March 9, 2011 - The Wall Street Transcript has just published its Pacific and Southwest 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: A Surge in M&A Deals - Outperformance and Heated Valuations for Texas Banking - Regionals Put Liquidity to Work - Regulatory and Loan Growth Headwinds Companies include: ViewPoint Financial (VPFG); Bank of Hawaii (BOH); Bank of Tokyo-Mitsubishi (MTU); CVB Financial (CVBF); Cadillac (GM); Center Financial (CLFC); City Holding (CHCO); City National (CYN); CoBiz (COBZ); Columbia Banking System (COLB); Comerica (CMA); Cullen/Frost (CFR); East West (EWBC); Fifth Third (FITB); First Financial (FFBC); First Interstate (FIBK); First PacTrust (FPTB); First Republic (FRC); FirstMerit (FMER); Glacier Bancorp (GBCI); International Bancshares (IBOC); JPMorgan (JPM); M&I (MI); Mercedes (DAI.DE); Nara Bancorp (NARA); PacWest Bancorp (PACW); Pacific Continental (PCBK); Pacific Premier (PPBI); Prosperity Bank (PRSP); SVB Financial (SIVB); Sterling (SBIB); SunTrust (STI); Texas Capital (TCBI); UCBH (UCBH.PK); Umpqua (UMPQ); United Bankshares (UBSI); Wal-Mart (WMT); Washington Federal (WFSL); Wells Fargo (WFC); Westamerica (WABC); Western Alliance (WAL); Whitney-Hancock (WTNY); Wilshire Bancorp (WIBC); Zions (ZION). In the following brief excerpt from just one one of the many in-depth interviews in this extensive report, an experienced Banking analyst discusses the outlook for the sector for investors. Edward Timmons joined Sterne Agee & Leach, Inc., in May 2008 as a Senior Research Analyst covering mid-cap banks. Prior to joining the firm, he was an Associate Analyst at Stifel, Nicolaus & Co., Inc., where he covered regional banks and thrifts. Mr. Timmons has also held various positions with JPMorgan Chase & Co. and Putnam Investments during his career in the financial services industry. He earned his undergraduate degree in finance from West Virginia University and his MBA from the College of William & Mary. TWST: You mentioned consolidation. Are you and investors looking for consolidation plays? If so, what do you look for? Mr. Timmons: I think people are trying to handicap the sellers. I think M&A is going to be one of the two main themes in 2011. I think return of capital through dividends and share buybacks will probably be the other main theme. But given the recent deals with M&I (MI) with Sterling (SBIB) down in Texas and the Whitney-Hancock (WTNY) deal, I think people are starting to really look at M&A and trying to handicap who are the sellers and at what price might they be taken out. The challenge in California and across the Southwest is, given the difficult operating environment and the uncertainty out there still - you still have double-digit unemployment and that's not really coming down at the same rate as the national rate - so the issue is the marks on the loan book, on the performing book, they are just too great at this point. They basically wipe out the reserve, wipe out the equity and they are creating too much goodwill to make sense for a lot of these banks to make acquisitions. So as I mentioned, I think at the small end you might see "too small to succeed" drive some of these deals in the near term, but I think as you move up to midsized regionals, you're probably looking at later 2011, maybe 2012, before M&A really starts to heat up. I would say that's a little different in West Virginia, you didn't have the run-up. I'll just briefly touch on West Virginia, and I think that comment at this time will apply to the Northeast and a lot of parts of the mid-Atlantic. We didn't really have the run-up and the hyper growth that we saw in the earlier part of the decade in those markets, so we are not really seeing the bust. So you don't have the same kind of fair value marks on the loan book. So I think it makes it a lot easier to get deals done in those markets. We just saw United Bankshares (UBSI) in December announce an acquisition, and the pricing was not outrageous. So I think you will see Northeast, mid-Atlantic, West Virginia, you'll start to see deals happen there earlier and more often than you will out West. TWST: You mentioned a second theme for 2011, the return of capital through share buybacks and dividends. Would you tell us more about that? Mr. Timmons: As we've come through the cycle, companies have, mostly through equity raises, increased their capital levels. They've reduced a lot of their risk-weighted assets, and they're sitting on pretty healthy capital levels. At this point, we're looking out, and we've seen several quarters now of loan run-off. At least our estimates do not expect a whole lot of loan growth, if any, in 2011. So there's really nowhere to deploy the capital. So I think at point, absent of any other opportunities, they are going to start to look to increase dividends, start doing share buybacks and we've seen number of companies - City National (CYN) increased their dividend or really doubled their dividend, from $0.10 to $0.20, this past quarter. Westamerica (WABC) has a healthy dividend and continues to buy back stock. Out West, there are not as many that are doing that. West Virginia certainly. They are all paying a pretty healthy dividend, and City Holding (CHCO) is buying shares back at a pretty healthy clip. But I think as we move through 2011 and most of these guys have repaid TARP and they have the ability to increase dividends, I think you're going to start to see that play out across the industry. TWST: Do you see that as something that will attract the attention of investors? 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 |
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