A report Monday identified six large and midsize banks most poised to expand through failed-bank acquisitions in the near future.
Large companies, such as BB&T Corp. and U.S. Bancorp, are expected to add to their failed-bank deals, said the report by FBR Capital Markets, a unit of Friedman, Billings, Ramsey Group Inc. Regional players Washington Federal Inc., NewAlliance Bancshares Inc., People's United Financial Inc. and New York Community Bancorp are also likely to complete deals that will be "meaningful to their bottom lines."
"We expect that several banks in our coverage universe are likely to take advantage of" assisted "transactions in the near to medium term," the report said.
(People's United announced a deal Monday, but not one for a failed bank — see "People's United: This Deal Is Just a Prologue".)
However, the industry's largest firms will likely not participate in assisted deals. They "have enough on their plates, in our view, given their recent, sizable acquisitions," the report said.
The analysts said as bank failures remain "elevated," companies will be drawn to the low costs and high earnings potential of obtaining institutions with assistance from the Federal Deposit Insurance Corp. In most failed-bank situations, that assistance has included a pledge from the FDIC to cover a large portion of the losses from a closed institution.
"FDIC-assisted transactions are in high demand because acquirers benefit from free deposits and increased market penetration, which can be very accretive to core operating earnings," the report said.