"Three US Regional Banks Facing Profit Decline May Be Acquired by Major Banks"

Investment Bank KBW Analysis Report
Comerica, Zions, First Horizon
Likely to be Driven by M&A

There is an analysis that three U.S. regional banks, including Comerica, which are facing increasing profitability pressure, are highly likely to be acquired by large banks.

On the 27th (local time), U.S. economic media CNBC cited a report from investment bank KBW, analyzing that three regional banks?Comerica, Zions, and First Horizon?could be potential acquisition targets for large banks.

These banks were frequently mentioned along with the liquidity crisis triggered by Silicon Valley Bank (SVB) in March. In particular, Comerica raised warning signals due to its higher proportion of commercial real estate loans compared to other banks of similar size.

Christopher McGratty, an analyst at KBW, explained that banks with asset sizes between $80 billion and $120 billion (approximately 104 trillion to 156 trillion KRW) are currently in a difficult situation, and among bank groups with assets over $10 billion (approximately 13 trillion KRW), they have the lowest structural profitability.

Although they bear the burden of needing to grow larger to prepare for future regulatory asset requirements, McGratty believes that even if they increase their size, it will be difficult to escape regulatory issues.

[Image source=EPA Yonhap News]

Earlier, U.S. financial authorities overhauled related regulations after regional banks repeatedly collapsed due to this year’s interest rate hikes and deposit withdrawals. Regulations previously applied to global large banks were expanded to include banks with assets of $100 billion (approximately 130 trillion KRW) or more.

Accordingly, the banking industry is expected to be divided into three groups by asset size: over $120 billion (approximately 156 trillion KRW), $50 billion to $80 billion (approximately 65 trillion to 104 trillion KRW), and $20 billion to $50 billion (approximately 26 trillion to 65 trillion KRW), optimizing profitability according to each scale.

Meanwhile, banks with assets between $80 billion and $90 billion, such as Zions and Comerica, are analyzed to have their corporate value suppressed by the possibility that their asset size will soon reach $100 billion and become subject to regulation.

On the other hand, KBW explained that large banks with high profitability, like Huntington, are in a position to grow further through acquisitions of smaller banks. McGratty said, "We have seen this throughout banking history," adding, "There are still too many banks, and if they grow through mergers and acquisitions, they can be more successful."

In March, amid high interest rates, losses from bond investments, and spreading fear, a bank run (massive deposit withdrawal) led to the collapse of Silicon Valley Bank (SVB), followed by the bankruptcies of regional banks such as First Republic Bank and Signature Bank. Subsequently, other regional banks were engulfed in crisis rumors, causing liquidity instability across the financial market.

This content was produced with the assistance of AI translation services.