Comerica, Zions, First Horizon: Potential Acquisition Targets for Large U.S. Banks

A recent analysis suggests that three U.S. regional banks, including Comerica, are likely to be acquired by larger banks amid growing pressure on profitability.

Based on a KBW investment bank report, Comerica, Zions, and First Horizon are potential acquisition targets for larger banks.

The financial community has frequently mentioned these banks since the Silicon Valley Bank (SVB) liquidity crisis in March. Comerica, in particular, has been sounding alarm bells due to its high proportion of commercial real estate loans compared to other banks of similar size.

Christopher McGratty, an analyst at KBW, explained that banks with assets ranging from $80 billion to $120 billion are currently in a challenging situation. These banks have the lowest structural profitability among banking groups with assets over $10 billion.

Despite the burden of growing to a larger scale to prepare for future asset regulations, these banks are believed to struggle with regulatory issues even if they increase their scale.

Earlier this year, U.S. financial authorities significantly revised related systems after a series of regional bank collapses due to interest rate hikes and deposit withdrawal incidents. Regulators have expanded the regulations, previously applicable only to large global banks, to include banks with over $100 billion in assets.

As a result, the banking industry is likely to divide into three groups: those with assets over $120 billion, those between $50 billion and $80 billion, and those between $20 billion and $50 billion. Each group will likely optimize profitability according to its scale.

Amidst this, banks like Zions and Comerica, which have assets between $80 billion and $90 billion, may soon cross the $100 billion mark and become subject to these regulations. This impending change is believed to be suppressing their corporate value.

On the other hand, KBW explained that large banks with high profitability, such as Huntington, are positioned to expand further by acquiring smaller banks. McGratty suggested that history has shown that there are still too many banks, and they can achieve greater success by increasing their scale through mergers and acquisitions.

In March, regional banks, including First Republic Bank and Signature Bank, went bankrupt due to bond investment losses amid high-interest rates and the spread of panic leading to bank runs (massive deposit withdrawals) following the bankruptcy of Silicon Valley Bank (SVB). Subsequently, rumors of crisis engulfed other regional banks, causing liquidity anxiety in the financial market.

By. Yoo Jin Jo