More than half of community bankers think they’ll be involved in a deal within the next two years, either as a buyer or a seller, according to a survey by KPMG.
The survey also found that nearly half of respondents believe that regulatory pressures are the most significant barrier to their growth prospects. KPMG surveyed executives at banks with $1 billion and $20 billion of assets during a process that took place in September.
“The regulatory burden is changing profit models for banking,” says John Depman, KPMG’s national leader of regional and community banking. “You put two banks together and their compliance costs are shared.”
An avalanche of deals may not materialize in 2013, but 2012 is on track to be one of the most-active years for consolidation since the financial crisis began, Depman says. “It’s not a flood, but activity is picking up,” he says. “People are considering their options.”
KPMG surveyed chief executives, chief financial officers and other executive and senior vice presidents.
Bankers had differing thoughts on the amount of scale necessary to remain independent, Depman says. Roughly half of the respondents said that it takes at least $1 billion in assets to make a claim to independent, but another 28% drew the line at $500 million. Geography may have played a role in those results, Depman says.
“My suspicion is that there are a lot of small banks in the middle of the country,” Depman says. “If you’re on the east coast or west coast, the minimum asset size is probably a larger asset size than in the middle of the country.”
The survey also showed that the proposed Basel III capital requirements are weighing heavily on community bankers’ minds. About two-thirds said that Basel III is likely to prompt them to raise capital, either by necessity or preference.
“Over half the banks in the population would need to go out and raise additional capital,” Depman says. “That’s huge, given what’s going on with the profitability model of banking.”