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New charters were once an integral piece of the bank M&A food chain, allowing bankers to start anew after selling their institutions. Do novo banking has all but dried up, and the dearth of startups has made executives hesitant to sell their banks.
August 11 -
The founding CEO of Bank of Bird-in-Hand was told by regulators that his group's "thorough" vetting would be the norm going forward.
December 4 -
Investors will remain reluctant to take on the personal risk inherent in establishing de novo community banks as long as new regulations remain unwieldy and returns stay low, according to Richard Magrann-Wells.
August 19 -
Many small banks are well managed and provide value to their customers and investors. The more profound question for the economy is what effect the little guys have on the stability and efficiency of the U.S. financial system.
December 19
The spigot for new bank charters will be turned on slowly during the latter half of this decade, predicts the chief executive of the Independent Community Bankers of America.
When and if de novo activity will resume has been a hot topic of discussion in banking circles lately. Many industry players believe it is a lost cause; the cost of entry is too high and the chances of building a high-performing bank are too low. Others, however, assert that groups of entrepreneurial bankers will see voids to fill and activity will resume eventually.
Camden Fine, who has led the ICBA for the past decade and naturally has a vested interest in rallying against a smaller industry, said in an interview Friday that he believes new activity will begin in earnest in 2017 or so.
"It may not be as robust as the late '90s, when we had 150 to 200 [new banks] a year, but maybe 50 or 60 a year, particularly by 2020," Fine said. "First in, say 2017, it will be 10 to 15."
The new activity will sprout once the industry players feel the operating environment has leveled off, he said. "The money will come back once we digest [new regulation] and the turmoil gets in the rear view," Fine said, adding that startup capital "will maybe go where there is no local bank."
Fine's comments on de novos were part of a discussion concerning the number of banks in the industry over the next five years or so.
"We have 6,300 community banks as of right now," Fine said. "My personal prediction is that we will be at 4,800 to 5,300 banks" by the end of 2019.
Based on his projections, Fine isn't expecting M&A activity to ramp up too much.
If the
Fine and the ICBA have been vocal about their opposition to consolidation. Fine,
"Investment bankers have a vested interest to drive consolidation and they are taking advantage of an atmosphere that is oppressive," he said.
