4 bank stocks that could be candidates for acquisition in 2021
The consolidation of regional banks really accelerated in the last months of 2020, with three major deals announced since October. The trend is only expected to continue in 2021, as regional banks seek to increase their size and invest in digital capabilities to better compete with mega-banks. Acquisitions can often result in a nice premium for the acquired bank, so it is a good idea to seek out candidates for the acquisition. While this is not always the case, a good indicator of a potential bank acquisition candidate is a low price to book (P / TBV) ratio. Banks with higher P / TBVs tend to prey on banks with lower P / TBVs in order to maximize the value of their currency. Here are four banks with over $ 20 billion in assets that recently had a low P / TBV.
1. Bancorp investors
Bancorp Investors (NASDAQ: VSI) is a $ 26.6 billion asset bank based in New Jersey. It appears to be a fairly standard commercial bank with standard commercial and residential lending products. At the time of this writing, the bank was trading at a slight discount to the tangible book value.
Notably, the bank recently acquired around eight branches in New Jersey and Pennsylvania from the Boston-based company Berkshire Hills Bancorp (NYSE: BHLB). The president and chief operating officer of Investors Bancorp said the Bank partially made the deal to keep competitors out, suggesting the bank is worried about the competitive landscape going forward. However, the bank’s net profit in the first nine months of 2020 is essentially flat compared to the first nine quarters of 2019, which is pretty good considering everything that has happened.
2. Associated Banc-Corp
$ 35 billion in assets Banc-Corp associated (NYSE: ASB) is headquartered in Green Bay, Wisconsin and also operates in Minnesota and Illinois. The three main sectors of activity of the bank are the corporate and commercial specialty; community, consumer and business; and risk management and shared services.
The bank’s core profitability has been hammered this year, and the bank has already taken several steps to improve efficiency. It completed the divestiture of its Associated Benefits and Risk Consulting unit in the second quarter of the year and announced the divestment or consolidation of 22 branches in the third quarter. The bank is currently trading around tangible book value.
Comerica (NYSE: CMA) is an $ 84 billion asset bank based in Dallas, Texas. The bank recently traded at around 108% of tangible book value.
Comerica seems to me a very good candidate for acquisition for one of the biggest banks or super-regional banks. Due to the Federal Reserve’s sharp rate cuts at the start of the year, the bank’s margin fell 120 basis points to 2.33% at the end of the third quarter. Profit before tax for the third quarter of 2020 is down more than 30% compared to last year.
The bank will likely have to consider whether it can continue to be competitive and provide adequate returns to its shareholders in the future. Comerica would offer any acquiring bank a great foray into the attractive Texas market.
4. Bank United
$ 35 billion in assets BankUnited (NYSE: BKU) is based in Miami Lakes, Florida, and appears to have a problem similar to Comerica: profitability has plummeted this year. Net income for the first nine months of the year was around $ 112 million, down about 50% from the first nine months of 2019.
While credit costs are certainly responsible for most of the decline, Bank United has seen both net interest income and non-interest income decline in 2020, so it can be difficult to increase. its revenues in 2021. The bank recently traded at around 112% of tangible book value. With Florida also having a rapidly growing population, the acquisition of BankUnited could prove to be a good entry point into the Sunshine State.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.