M&A Activity In Banking At Record Setting Pace

We are only 4 months through 2020, yet the annual deal value of bank and thrift M&A is already near the long term average. This year is easily going to beat out every year from 2011 to 2020 except 2019. At the current trajectory, it will also beat the 2019 spike, but it’s not clear if deal flow will stay at this rate. There are thousands of small banks in America. There is so much room for activity. It seems like activity is getting back to the trajectory it was on prior to the pandemic. One of the key trends in banking is having few branches. We can call these branch-light banks.

Bank stocks were very cheap in late October prior to the positive vaccine data being released. The banks are doing really well because this was a quick credit cycle. Most of the worst fears haven’t come true. We are a couple of months away from the worst parts of the economy, which include leisure and hospitality, fully recovering. Obviously, the strong housing market is helping banks.

The rising 10-year yield is also helping net interest margins. The chart also shows the average deal size is exploding. Many thrift banks trade on the OTC or are thinly traded on traditional exchanges. The plan should be to buy a small bank for its deposits and strong loans and implement new technology that they haven’t utilized. Banks fell behind the finance apps like Cash App and Venmo. It’s time for the small banks to fight back. The best way to do this is to invest in new technology; it’s not as expensive as it once was.

What A Housing Market

The February 20-city Case Shiller home price index was up 11.9% from last year (national was up 15%). That’s up from 11.1% growth in January. Keep in mind, we still haven’t gotten to weak comps. Price growth will be very high next month.

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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