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Posted by James Tannahill

After a long quiet period, U.S. bank mergers and acquisitions (M&A) activity seems to be back on the rise. On April 23, 2019, Rumor Hound sourced low popularity chatter on Zions Bancorporation (NASDAQ: ZION), a large U.S. regional bank based in Salt Lake City, Utah. While this is simply one source, this may be the beginning of a nascent boom in bank deals, especially after the surprise $66 billion mergers of regionals SunTrust Banks and BB&T.


Despite a flurry of crisis-driven mergers in 2008 and 2009, post-recovery deal-making in banking has been rather timid. Much of this relates to new regulations, most notably the 2010 Dodd-Frank Act, which required banks to hold more equity capital against their assets and gave federal regulators sweeping power over an enhanced supervision regime. Both factors led banks to retrench, seeking to restructure by exiting unprofitable businesses rather than search for expansion opportunities. After the change in administration, however, new policies are beginning to unleash new interest in bank M&A. The Tax Cuts and Jobs Act (TCJA), which reduced the corporate tax rate from 35% to 21%, free's up additional capital for banks to deploy on expansion opportunities or enhance capital returns to shareholders. In addition, a reform to the Dodd-Frank law increases the threshold at which bank holding companies become “systemically important” to $250 billion from $50 billion. Removal from that status, which leads to additional capital charges, as well as steeper operational and balance sheet scrutiny, frees up more resource available to devote toward expansion.


Zions is mid-sized in the pecking order of U.S. banks, with a $68 billion balance sheet and a market capitalization of about $9 billion. The company’s asset size places it well below the new systemic importance threshold, giving ample room for larger competitors to swallow the company’s assets. Outside of the regulatory relief, there is significant industrial logic to bank consolidation in the $50-200 billion asset range. New competition, especially from financial technology and better-financed larger banks, threaten mid-sized regionals’ market shares and profitability. The expansion would allow these institutions to spread the high cost of technological transformation across a larger deposit and revenue pool. With a strong position in the western portion of the United States, expect Zions to receive merger interest from slightly larger competitors domestically, such as Comerica or KeyBank. In addition, large balance sheet foreign banks have been expanding rapidly in the U.S., so do not be surprised if names such as BNP Paribas, Santander or Royal Bank of Canada (RBC) play a role in bank consolidation.


About Zions Bancorporation

Zions Bancorporation, N.A. is one of the nation's premier financial services companies with total assets exceeding $65 billion. Zions operates under local management teams and distinct brands in 11 western states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming. The company is a national leader in Small Business Administration lending and public finance advisory services, and is a consistent top recipient of Greenwich Excellence awards in banking. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to subsidiary banks can be accessed at www.zionsbancorporation.com.

Topics: Rumor Hound