According to Fitch Ratings, the beginning of catalysts emerging in the market could prompt an increase in merger and acquisition activities in the US banking sector. Factors for growth included higher stock values for healthy institutions, a strategic focus on growing loans through acquisitions, a view toward mitigating potential interest rate risk, a perception on sufficient scale required to manage higher regulatory and compliance costs and fatigue among the management and boards of potential sellers.
Fitch believed that the consolidators of the industry would efficiently run banks with strong earnings performance. Fitch also stated that increased cost structures, growing economies of scale that benefit bigger institutions, a desire for growth and intense competition over new loans have spawned increased in banking M&A activity. Banks with high cost structures, elevated efficiency ratios and lower capital ratios that its peers could be targets of consolidation. Banks with operations in growing geographic markets and a presence in asset classes that performed well through the credit crisis could also be considered and more likely to be purchased.
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