An uneasy economic outlook could have more banks looking to sell.
At Raymond James Financial Inc.'s U.S. Bank Conference in Chicago, bankers said they expect potential stock market volatility and a tough operating environment could convince more banks to look for a sale. Executives said they expect the current pace of M&A to persist or increase in the face of slowing global economic growth, a looming U.S. election and a continuing evolution in banking that is forcing many depository institutions to reevaluate their business models.
"It's uncertain times," Simmons First National Corp. Chairman and CEO George Makris Jr. said Sept. 4 at the conference. "We're going to see more and more people willing to at least consider a sale."
So far in 2019, bankers have announced 163 deals with an aggregate value of $44.83 billion, compared to 175 deals worth $23.12 billion during the same period of 2018, according to S&P Global Market Intelligence data.
Some bank executives said they think M&A activity could increase through year-end since many analysts believe 2020 could be highly volatile for stocks leading up to the U.S. presidential elections. Deal activity usually slows when stock prices fluctuate as volatility can make it difficult for companies to settle on a deal value.
That fear of potentially lower valuations next year, combined with an interest rate environment that has presented a newfound challenge to banking profits, is causing more and more executives to weigh a deal, said John Roddy, a managing director and head of financial services at Raymond James.
"Folks who are thinking about selling are realizing it could be now or never," Roddy said at the conference.
A couple of serial acquirers at the Raymond James conference said they remain on the prowl for another deal. Simmons First, which had $17.94 billion in assets at the end of June, has been active in M&A with 12 acquisitions in the last five years. The Pine Bluff, Ark.-based bank's most recent deal came in July when it agreed to purchase all of Landrum Co.'s outstanding shares in a deal valued at about $450 million. Makris has said the company hopes to complete that transaction by year-end to provide time to prepare for the current expected credit loss model, a new accounting standard it will adopt at the beginning of 2020.
Through its string of recent deals, Simmons First has expanded its footprint well beyond its Arkansas roots with 216 branches across eight states, according to S&P Global Market Intelligence data. It ranked as a top 15 bank based on market share in Oklahoma, Tennessee, Missouri and Arkansas at the end of 2018 as well.
"Market share means something," Makris said.
But scale is just one of several factors driving bank M&A in 2019.
With customers increasingly banking online, technology has become a core part of many banks' growth strategies. It was a leading factor behind the BB&T Corp.-SunTrust Banks Inc. deal. Two Michigan community banks, ChoiceOne Financial Services Inc. and County Bank Corp, also named technology as a major reason behind their April merger agreement.
For another serial acquirer, Wintrust Financial Corp., financial metrics such as earnings accretion are key considerations. The Chicago-based bank has struck 11 bank deals since the beginning of 2014, three of which have come in 2019 alone, according to S&P Global Market Intelligence data. The bank, which had $33.64 billion in assets at the end of the second quarter, has largely kept its M&A to smaller deals. Wintrust's $90.5 million purchase of SBC Inc. marks the company's largest announced deal since 2005.
"We don't want to do a deal that's going to be negatively accretive to us for a period of time," Wintrust President and CEO Edward Wehmer said at the conference. "It's got to be accretive to us on day one."
