5 takeaways from recent M&A activity in banking

April 6, 2023 9:11 AM

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Mergers and acquisitions have been going through something of a slump recently, with the numbers following a downward trend in the past two years that may linger on through the coming year due to regulatory hurdles, fears of a recession and other concerns. But despite these reasons for caution, the appetite for deal-making remains strong.

Here are five notable stories on the latest deals and activity in the industry.

Opportunity beckons for Umpqua after deal closes

When one door closes, another one opens. Or in Umpqua Bank's case, the opening up of the chance to drive into new markets beyond the Pacific Northwest after the merger between Umpqua and Columbia Banking recently closed.

In an interview with American Banker, Clint Stein, CEO of Umpqua Bank, talked about how he plans to expand from the company's traditional Northwest base into the West, why it's an advantage to be "a community bank at scale," and what's at the top of his to-do list.

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Umpqua CEO sees 'plenty of opportunity to grow' in wake of deal closing

M&A deal bears more fruit for both buyer and seller

Commercial customers of BMO Financial and BNP Paribas are set to benefit from a special arrangement between the two firms following the close of BMO's purchase of Bank of the West from BNP in February.

The recently announced agreement, which has been proceeding in parallel with the M&A deal, allows BMO's clients in the U.S. and Canada to use BNP's services in Europe and Asia, while BNP's clients in Europe can continue to use the Bank of the West's services in the U.S. and Canada.

The agreement will not involve any money exchanging hands between BMO and BNP, as according to Dan Marszalek, BMO's co-head of U.S. commercial banking, both parties expect to profit from "really good reciprocity in terms of two-way referrals."

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BMO and BNP Paribas announce cross-border agreement in wake of M&A deal

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Decline in M&A activity looks set to continue

Senior bank executives are not optimistic about the prospects for mergers and acquisitions in the coming year due to concerns about regulatory oversight and fears of a recession among other factors.

"As we look at it, 2023 M&A is going to be pretty slow for a couple of reasons," said John Corbett, CEO of SouthState Corp. "Right now, there's just not a lot of clarity as it relates to the regulatory approval process, and there's not a lot of clarity as it relates to potential recession risk."

A decrease in M&A activity in 2023 would continue a downward trend that has seen 167 acquisitions with a combined value of $76.6 billion in 2022, following 205 deals with a combined value of $22.6 billion in 2021.

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Acquisitive banks sour on dealmaking in 2023

From community thrift to national bank via acquisition

New York Community Bancorp was established as a leading rent-regulated lender in New York City, but Thomas Cangemi had a new vision for the firm after assuming the role of CEO in 2020 - transitioning the business from a traditional thrift model to a commercial bank model via strategic acquisition.

With the purchase of Flagstar Bancorp completed on December 1, 2022, New York Community is on the way to transforming both strategically and culturally into a full-service commercial bank, with a rebrand as "Flagstar" slated for early 2024.

Cangemi spoke with American Banker about the challenges he faced in bringing his vision to life, the need for cultural change to make it happen, and the plans he has for the company's future.

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How New York Community is remaking itself after buying Flagstar

New acquisition’s positive earnings-per-share forecast offset by costs

U.S. Bancorp's end-of-year acquisition of MUFG Union Bank is showing promising signs of being a success, but the deal has not been without its challenges.

In a recent update on the transaction, CFO Terry Dolan announced an increase in the company's earnings-per-share forecast to between 8% and 9%. On the downside, merger-related expenses went up by $200 million to $1.4 billion.

Dolan however remains positive, particularly about the increase in the firm's share of deposits in California. "One thing that's very important is that … we'll go from about 10th in the market to about fifth in the market," said Dolan. "And that really provides an opportunity."

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U.S. Bank gives mixed update on impact of Union Bank addition