Bank CEOs Keep Their Appetites for Deals in Check

Caution is the watchword among executives this earnings season when pressed for insights into their M&A strategy.

Officials at Fifth Third Bancorp and Huntington Bancshares Inc. — two midsize banks that were late to recover from the downturn — said in discussing fourth-quarter profits that they do not need to buy other banks to grow. U.S. Bancorp and Wells Fargo & Co. Inc. — two healthier banks with more buying power — said they were more interested in acquiring parts of banks rather than entire ones.

Most outlined the same three acquisition criteria: Deals that are safe, cheap and pleasing to investors.

"M&A remains an alternative that we monitor closely. It's not something that we are going to push before it's time. I think we will be very disciplined," Fifth Third Chief Executive Kevin Kabat said Friday.

The Cincinnati company's top aim is organic growth, he said, though it may eventually buy banks that can boost its share of existing markets. The timing depends on when bid-ask spreads narrow between buyers and sellers, he said.

"I don't expect that to happen in the near term," he said. "So in all likelihood it would be later in 2012 rather than earlier."

Stephen Steinour, Huntington's chairman and CEO, also stressed customer growth before acquisitions when listing the bank's strategic objectives.

Huntington's "first priority" is to execute its core strategy of attracting customers by minimizing fees and prices — and making a big deal of it, Steinour said in an interview Thursday.

He cited Huntington's solid deposit growth and improved results in 2011 as signs that its no-new-fees strategy is paying off. Huntington has the capital, liquidity and know-how to acquire, Steinour said. But its focus is on taking share, not buying other banks.

Richard Davis, the chairman, president and CEO of U.S. Bancorp, indicated Jan. 18 that the Minneapolis is more likely to buy bank assets than entire banks. He pegged corporate trust and credit cards as two areas where U.S. Bancorp sees an opportunity to bulk up, as more of both kinds of assets come to market.

"We have a scalable business [in credit cards] and I think we've built a real nice reputation in the business as being a great acquirer."

It has less of an appetite for whole bank deals. It would look at small, low-price deals in markets where it has a presence, Davis said.

"If it's not in our footprint, we're not touching it," Davis said.

The company has the capability to buy large banks, but it is not yearning to do so.

"I think we either have the capital and I know we have the regulator confidence, and I believe the Street would accept a deal if we were to look at something and have a capital raise," Davis said. "But it's not one of our goals. It would have to be something so undeniably good that you didn't want to pass" it up.

John Stumpf, the chairman and CEO of Wells Fargo, said the San Francisco company was cautiously considering deals for specific assets or lines of business. Wells Fargo — like JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. — cannot buy any whole banks without special approval because of the 10% national deposit cap.

"We're kicking lots of tires. And our use of capital on the acquisition side will be for businesses that are bolt-on to existing areas of expertise that we have," Stumpf said on Jan. 17. If "we do some things, it will be done right at the right price. It'll be compelling for our stockholders. If we can't find those things, we won't do them."

M&T Bank Corp., is positioned — but not desperate — to buy more banks after closing its purchase of Wilmington Trust Corp. of Delaware last year, Rene Jones, the Buffalo company's executive vice president and chief financial officer said on Jan. 17.

"If opportunities come up we're in great shape," Jones said in an interview last week. "We pride ourselves on being prepared."