Core Insights - Banks are actively pursuing mergers to achieve scale despite investor skepticism regarding the impact on tangible book value [4][8][12] - The current environment is seeing a resurgence in bank dealmaking, with 2025 projected to be the largest year for bank transactions since before the pandemic [12] Group 1: Market Reactions to Mergers - First Horizon's stock fell by as much as 13% after announcing plans for a deal, while Eastern Bankshares saw a drop of over 4.5% following similar comments from its CEO [2] - An analysis revealed that the stock prices of buyers in major bank transactions typically declined in the 30 trading days post-announcement, with Fifth Third Bancorp's shares down more than 4% after acquiring Comerica [3] Group 2: Investor Sentiment and Strategic Decisions - Investors are increasingly concerned about tangible book value dilution and the risks associated with mergers, leading to a disconnect between bank executives and market expectations [4][8] - Activist investor HoldCo Asset Management has been vocal against further acquisitions by certain banks, advocating instead for stock buybacks and potential sales to other institutions [7][9] Group 3: Performance and Strategic Outlook - Truist Securities' analysis indicates that banks that reduce their share counts tend to outperform their peers, with 30 out of the 72 largest U.S. banks having shrunk their share count in the last decade [10] - Despite the skepticism, banks are continuing to pursue M&A opportunities, with Fifth Third's acquisition of Comerica expected to close without diluting its tangible book value per share [12][13]
Banks keep merging. Investors keep punishing them.