Speculating on M&A is a tried and true way of
passing the time between major news releases, and it’s overwhelmingly
just a theoretical exercise, as the number of potential deals always
dwarfs the number of deals done. That said, a recent turn toward mergers
of equals in the banking space, including the large proposed tie-up of BB&T (BBT) and SunTrust (STI), adds a new element to the story.
Although
I don’t think you can count it as any sort of “base case”, and both
banks have expressed their disinterest in large-scale whole bank
transactions, I believe a merger of equals (or near-equals) between U.S. Bancorp (USB) and PNC Financial (PNC)
could not only be very interesting from an EPS and TBV accretion point
of view, but also from the perspective of creating a truly national bank
with strong positions in commercial and retail lending, payments,
wealth management, and other fee-generating businesses.
I
want to emphasize again that I’m not expecting such a transaction, and I
do not recommending buying either U.S. Bancorp or PNC on the basis of
M&A potential. Still, these are two high-quality banks traded below
my estimates of fair value as is, and a transaction could create value
for both shareholder groups.
Continue here:
A U.S. Bancorp - PNC Financial Tie-Up Could Be A Win-Win
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