Consolidation among U.S. banks, particularly capital-squeezed small- and mid-cap lenders, is set to rise in the next year or two due to persistently low interest rates, RBC banking analyst Gerard Cassidy said.
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The increase in deal activity will also be driven by expense pressure from the new regulatory environment, Cassidy wrote in a note to clients.
U.S. regional banks have long complained that capital reforms, intended to rein in the excesses of bigger banks, have placed undue burdens on smaller lenders.
Now, an imminent interest rate hike appears doubtful after the U.S. Federal Reserve's meeting minutes on Wednesday highlighted concern over the state of the global economy.
Cassidy, who is rated 4-star by Thomson Reuters StarMine, said acquisitions by bigger banks, however, are unlikely until late 2016 or 2017 due to the heightened regulatory scrutiny.
Most banking buys so far have been by lenders with less than $5 billion in assets.
This week, BB&T (NYSE:BBT) said it would buy National Penn Bancshares (NASDAQ:NPBC) for about $1.8 billion, hot on the heels of regulatory approval for its $2.5 billion takeover of Susquehanna Bancshares, a rare large U.S. banking deal since the financial crisis.
Cassidy said lenders that had strong takeover appeal included Republic First Bancorp (NASDAQ:FRBK), Cascade Bancorp (NASDAQ:CACB), Anchor BanCorp Wisconsin (NASDAQ:ABCW), Capital City Bank Group (NASDAQ:CCBG) and Heartland Financial USA (NASDAQ:HTLF).
More than 2,800 deals worth a total $240 billion have been announced this year in the global finance industry, an increase of 8 percent in value terms from the same period last year, according to Thomson Reuters data.
(Reporting by Richa Naidu and Tenzin Pema in Bengaluru; Editing by Sriraj Kalluvila)