With A Much Different Risk/Reward Outlook, Independent And Texas Capital Call Off Their Merger

The COVID-19 outbreak has created some significant disruptions for the banking sector, with almost every bank building reserves in anticipation of higher loan losses from the ensuing recessions. Those disruptions have also led to the termination of the proposed merger of equals between Independent Bank (IBTX) and Texas Capital Bancshares (TCBI), with the two parties agreeing to go their separate ways without any termination fees or other commitments.

Looking ahead, I can see both banks as candidates to be involved in future M&A, though the challenges TCBI is currently facing (including the need to find a new CEO) lead me to believe they'd more likely be a seller than a buyer. While the current valuation on TCBI does look exceptionally pessimistic, I'd prefer IBTX at this point given the greater uncertainties in TCBI's business mix.

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With A Much Different Risk/Reward Outlook, Independent And Texas Capital Call Off Their Merger