Conventional wisdom states that acquirers need a fairly rich valuation to even consider using their shares as currency for a deal of size.

Then again, markets can be relied on to defy conventional wisdom. Indeed, some look at what the bear market has done to bank stocks as clearing the way for acquisition-minded banks to start shopping again.

Not because potential targets are cheap, although that is an obvious consideration, but for reasons of market psychology. Specifically, the banks are less worried today about “penalty risk,” said Anthony Terracciano, who joined Dime Bancorp as chairman last year to assist in that company’s fight to fend off, and recover from, a hostile bid from North Fork Bancorp.

“When tech stocks were returning 30% compound growth rates, nobody could justify buying an old economy stock unless there was an expectation that the company would be sold,” Mr. Terracciano said in a recent interview. Speaking in historical terms rather than of any particular bank in the conversation, he said that “banks that bought were punished because in effect they were telling the market they weren’t going to be sold.”

Some banks were given an exemption, but those were few and far between. BB&T Corp. was a busy buyer, and Wells Fargo & Co. used its market pass to make several acquisitions — picking up a bargain in First Security Corp. in the process. Likewise Fifth Third Bancorp and Firstar Corp., each of which had inked major deals by the time the year was out — Fifth Third picking up Old Kent Financial Corp. and Firstar buying itself into U.S. Bancorp.

There are still some banks for which the role of acquirer is best left to other players. First Union Corp., for example, which has regained a degree of favor on Wall Street, is just getting to the point where its operational turnaround might merit reward. (Prudential analyst Michael Mayo sees it as one of two “strong buys” in the group, the other being fellow market laggard Bank of America Corp.)

Such optimism among analysts may be helping First Union’s stock price some, but in the market there also continues to be persistent chatter (hope?) that a bigger bank will come along and strike while the stock price is low. That possibility has not been ignored by some Wall Street analysts. A few have chosen to weigh at least a small percentage of upside potential from a sale — penalty risk, if you look at it from management’s side — into their calculations of the company’s worth.

Of course in these less heady times sellers can be harder to find, and there are plenty of analysts who think a sale would be a bad outcome for First Union at this point.

That aversion to selling on the cheap may be why buyers on the prowl like Royal Bank of Scotland, which owns Citizens Financial Group Inc., the $10.4 billion bank holding company headquartered in Providence, R.I., have become considerably less coy about signaling their intentions, the better to flush out willing partners.

In Royal Bank’s latest quarterly presentation to investors and analysts, group chief executive Fred Goodwin was candid about plans to embark on a U.S. expansion program. (Royal Bank is no stranger to hostile bids, having acquired Natwest last year, the winner of dueling hostile bids with archrival Bank of Scotland.)

Possibilities included in-market deals for Citizens, which also operates in Massachusetts and Connecticut, or a foray into adjoining states. “The radar screen has been on” in adjoining states for some time, he said, according to listeners — comments confirmed by a Royal Bank spokesman.

One reason Royal Bank may feel up to a new round of purchases is that it has so quickly reaped the benefits of its Natwest acquisition. Early savings and revenue gains both far exceeded expectations, enough to mean hundreds of millions of dollars of profits above plan.

Royal Bank has not changed its overall expectations for cost savings from the integration. Instead it casts the benefit as an acceleration of what it planned to achieve.

That’s probably wise, if you accept the view of Mr. Terracciano on the aftermath of combinations. A veteran of a sale himself — his First Fidelity was acquired by none other than First Union in 1996 — he views integration savings in a now-or-never way. As far as wringing costs out of a merged organization, he said, “after the first 12 months, if you haven’t gotten it, you’re not going to get it.”

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