Bank Stock Roundup: M&A Dominates; Bank Of The Ozarks, BB&T In Focus

The positivity of the much-anticipated rate hike by the Federal Reserve was overshadowed over the last five trading days as reflected in banking stocks’ price movement. Challenging operating environment once again weighed upon investor sentiment, which led the stocks to move down.

Inorganic expansion was prominent for the last five days. With organic growth mostly subdued over the past several quarters, banks are expanding their footprints and market share through acquisitions. We believe such moves will help them improve top-line growth once interest rates start rising.

Additionally, the Financial Stability Board (“FSB”) proposed new regulations to further strengthen the financial system. The proposed rules aim to avert another round of bailouts which was needed post the 2008 financial crisis. (Read the last Bank Stock Roundup for Nov 6, 2015)

Recap of the Week’s Key Developments:

1. Bank of the Ozarks, Inc. (OZRK – Analyst Report) is on an acquisition spree. The company has signed a definitive agreement to buy St. Petersburg, FL-based C1 Financial, Inc. (BNK – Snapshot Report), marking its 15th acquisition since Mar 2010. The all-stock deal is valued at roughly $402.5 million or $25 per C1 Financial share (read more: Bank of the Ozarks on Acquisition Spree: C1 Financial Next).

2. BB&T Corp. (BBT – Analyst Report) announced the completion of the integration of Susquehanna Bancshares, Inc. with its operations. The successful conversion included core systems, products and the majority signage changes. The reopening of 239 branches in Pennsylvania, Maryland, New Jersey and West Virginia under the BB&T banner marked the end of a long-drawn out integration process (read more: BB&T Integrates Susquehanna, Expands into Mid-Atlantic).

3. In an attempt to prevent a recurrence of the 2008 financial fiasco, the FSB, a group of international regulators led by Bank of England’s governor Mark Carney, issued a new set of rules for “too big to fail” banks including JPMorgan Chase & Co. (JPM – Analyst Report), The Goldman Sachs Group, Inc. (GS – Analyst Report), Bank of America Corp. (BAC – Analyst Report) and Citigroup Inc. (C – Analyst Report).

Under the proposed rules, the 30 biggest global lenders may be required to raise an additional $1.2 trillion by 2022 in debt or other securities that can be written off at the time of winding down failing banks.This will supposedly help avoid another round of bailouts like what was needed in the wake of the financial crisis (read more: Big Banks Forced to Raise $1.2 Trillion in New FSB Rules?).

4. In separate but related news, Wells Fargo & Company (WFC – Analyst Report) is required to issue around $40–$60 billion in debt, for complying with the Fed’s proposed new long-term debt and capital requirement level for “too big to fail” banks. The announcement was made by CFO John Shrewsberry, at an investor conference.