Shopping season is in full swing for some of the country's large banking companies.
High-ranking executives at First Horizon National Corp., Comerica Inc. and U.S. Bancorp said at a banking conference Wednesday that they're on the prowl for failed-bank deals that could extend them into new markets or make them stronger in places where they already have a presence.
In a sign that regional players are getting more acquisitive, First Horizon Chief Executive Bryan Jordan said he was more interested in doing deals now that it looks like the economy is on the mend.
"Yeah, we probably are thinking more about it today than we were three to six months ago. Part of that is a recognition that the credit cycle has started to turn," Jordan said during the Goldman Sachs'-sponsored event in New York. "With the economy stabilizing that makes things a little easier."
Jordan said First Horizon, of Memphis, was primarily looking for failed banks in its home area of Tennessee, but it was also eyeing deals in out-of-state markets that have similar demographics to the places it does business.
Ralph W. Babb, the CEO of Comerica, said the Dallas company "would look at" acquisitions that "put us in the right locations within the Texas and California market." Though Comerica is primarily a business lender, he said, it is interested in expanding its retail presence in those areas.
Frank Barkocy, director of research with Mendon Capital Advisors, said the regional banking market is stratifying between those that have the capital and appetite to do deals and those that don't. In recent months, a handful of companies like Zions Bancorp. and SunTrust Banks Inc. have said publicly that they plan to abstain from any more federally assisted acquisitions because they are not worth the cost or effort.
Barkocy said the bankers' comments Wednesday indicate that rivals view an opening to "take advantage of disruption in their markets."
"I think we're going to see significantly more consolidation as we go forward," he said. "A lot of banks have already stated their desire to expand through FDIC-assisted transactions. Others are getting a little bit more comfortable doing so as their fundamentals improve and the economy shows signs of improvement."
Mark Fitzgibbon, director of research at Sandler O'Neill & Partners LP, said the Federal Deposit Insurance Corp. is shutting down banks in greater numbers, creating more opportunities.
"I would say the chatter [to do deals] has picked up in recent months. There is a feeling by some banks that they have seen the worst of it," Fitzgibbon said. "I think we will see M&A activity slowly start to pick up in the early part of next year and get to a fever pitch by the end of next year."
U.S. Bancorp is not waiting that long to get busy. Andrew Cecere, U.S. Bancorp's chief financial officer, said the Minneapolis lender has the "capacity" to buy as many as five failed banks a year, after doing a total of six failed-bank deals in the past two years.
U.S. Bancorp — which bought the failed-bank subsidiaries of FBOP Corp. in October — likes FDIC deals because they are a low-risk way to grow in areas where it does not have top market share, Cecere said. "We enjoy partnering with the FDIC," he said.