Miami could emerge as a hotbed for M&A as more international banks evaluate their global positions.
Latin American banks are eager to expand in South Florida, but there are few banks in Miami that can provide immediate heft. As a result, even the city's smallest banks could spark bidding wars if they choose to sell.
"There's a lot more talk about M&A in Florida," says Dave Seleski, president and chief executive at Stonegate Bank in Fort Lauderdale, Fla. "A lot of people are realizing that it might be better to team up with somebody else."
Foreign banks will increasingly emerge as acquirers because "they want to be in the U.S., and Miami is a good place to start," says Bowman Brown, a lawyer at Shutts & Bowen.
Last week, Chile's Banco de Credito e Inversiones agreed to buy City National Bank of Florida from Spain's Bankia for $883 million. The deal will vault BCI into the top ranks of foreign-owned banks in Miami. City National holds 1.8% of Miami-area deposits, according to the Federal Deposit Insurance Corp.
Venezuela's Mercantil Commercebank, a $6.7 billion-asset bank, holds 3% of the Miami area's deposits. Other Latin American banks with a large Miami presence include FirstBank, a $13 billion-asset unit of First Bancorp (FBP) in Puerto Rico, and Colombia's Helm Bank, with $848 million of assets.
Locally owned banks with less than $1 billion in assets are seriously considering mergers, says Joe Sirven, a lawyer at Holland & Knight in Miami. A rise in sellers could lure potential buyers who missed out on the $4.7 billion-asset City National, he says.
Several banks were reportedly interested in City National, including Toronto-Dominion Bank's TD Bank(TD), BB&T (BBT) and PNC Financial Services Group (PNC).
"I don't know that there are other opportunities out there [or] if there are banks in the marketplace with a profile even close to City National," Sirven says.
Some groups, such as the $3.3 billion-asset Bond Street Holdings in Weston, Fla., are pursuing roll-up strategies that could create banks that are appealing to outside buyers, says Paula Johannsen, managing director at Monroe Securities in Tampa, Fla.
"It may be that somebody does have to put together three or four acquisitions to really build some scale," Johannsen says. "I sense that there's an undercurrent of activity waiting to happen, but I think we still have a gap between buyers' and sellers' expectations."
Kent Ellert, chief executive of Bond Street's Florida Community Bank, did not return calls seeking comment.
The potential for more M&A activity also reflects more signs of a recovery in South Florida's economy. New construction is on the rise and loan volume has slowly improved, says William Penney, president and chief executive of the $140 million-asset Marine Bank & Trust in Vero Beach, Fla.
"We are beginning to see a noticeable improvement in the South Florida economy," John Kanas, chairman, president and chief executive of BankUnited (BKU) in Miami Lakes, told analysts during an April 24 conference call to discuss quarterly results.
"We are getting more and more comfortable with commercial real estate" in Florida, Kanas added. "In fact, it is a growing component of our loan growth."
Foreign banks could have a leg up bidding on South Florida banks. Many of them lack the same short-term pressures as U.S. banks, industry observers say.
"A five- or six-year payback period [on an acquisition] is not an issue for the international banks," says Seleski, who would not discuss whether Stonegate would consider selling. "If the U.S. banks did that, the analysts would kill them."
Still, foreign banks have their own challenges to making a U.S. deals work, Sirven says.
"If they have absolutely no presence here, then the regulators don't know who they are," Sirven says. "The hoops they have to jump through may be more significant than" those of a domestic acquirer.
Banks that could have an interest in making acquisitions around Miami could include Brazil's Banco do Brasil and Itaú Unibanco and Colombia's Bancolombia and Grupo Aval, industry observers say.
Regulatory roadblocks are unlikely to ward off Latin American banks that want to expand in South Florida, Brown says. "The decline in nonperforming loans associated with real estate has healed a lot of banking institutions" around Miami, he says.
Improved credit quality "has encouraged potential purchasers," Brown adds. "Acquisitions in Miami may be increasingly part of the strategy for a number of international banks."