2018 will not live long in the memory for attention-grabbing bank M&A activity. In fact, the past three years have been distinctly less than exciting.
In the US, for example, there have been only six deals with deal values of more than $2.5bn in the past three years, and none with a value more than $5.5bn.
As analysts at Wells Fargo flagged up recently, there were, on average, 330 banking M&A deals per year in the 1980s. This figure grew to 510 in the 1990s; in the past decade it has fallen to below 100.
There has been less pressure on banks’ boards to sell, given the current US market environment, with strong growth in credit and interest-rate growth. But, as Wells Fargo analysts note, that may be set to change – albeit slowly – as potential sellers start to experience headwinds with credit and deposit growth.
So, in the year ending, which deals – if any – have stood out? In May, Fifth Third announced plans to acquire Chicago-based MB Financial in a deal worth $4.7bn. MB has 92 branches in the Chicago area, and $15bn in deposits there. Combined with Fifth Third’s 145 branches and $11bn in local deposits, the new outfit will make Fifth Third the fourth-largest bank by deposits in Chicago.
2018: Fifth Third, Clydesdale, Synovus bulk up
Then there was the July announcement that Synovus is to acquire Florida Community Bank. The deal, worth around $2.9bn, is on schedule to complete in January, and catapults Synovus into the largest 50 US banks both by assets and by deposits.
Outside the US, Capitec’s $220m-plus deal in November to acquire the local assets Mercantile Bank was interesting in South Africa, but again not headline-grabbing. As EPI goes to press, further evidence of consolidation in Nigeria comes, with Access snapping up troubled Diamond Bank. That deal – if all goes to plan – is significant, and will create Nigeria’s largest retail bank.
In Eastern Europe, Société Générale’s decision in the summer to sell a 99.74% stake in Bulgarian arm Société Générale Expressbank and a 88.89% stake in Banka Société Générale Albania to Hungary’s OTP was of interest. Closer to home, Clydesdale’s £1.7bn (£2.15bn) bid to acquire Virgin Money was announced in June.
A number of potential takeovers have failed to materialise. Analysts have speculated that Bank Millennium might be up for grabs, but Portuguese owner BCP continues to hold a 50.1% stake. In Romania, Banca Romaneasca is being sold by National Bank of Greece but, rather surprisingly, attracted only two bidders. And that is about it, really – all in all, not a great year for bank M&As.
IPOs: Adyen a rare 2018 IPO highlight
2018 will not live long in the memory for IPO activity either. Dutch payments outfit Adyen is the exception to the rule, with a mega-successful listing. It followed that with a 67% rise in net revenue for the first half, and processed €70bn ($80bn) in payments for the period, up 43% on the year before. Elsewhere, there was little IPO activity of note, and a number attracted negative headlines, such as Funding Circle.
Contrast this with payments M&As. For part of the year, it looked as if Ingenico would be snapped up. Ingenico caught the attention of Natixis and Edenred, among others. Ingenico shares have endured a roller-coaster year, dropping from €92 at the start of the year to €54 in mid December, a 40% drop.
Wirecard soars, Ingenico drops
In 2016, Ingenico said that its ePayments division, combining Ogone and GlobalConnect, would take the fight to the likes of Worldpay. That followed Ingenico’s failed £6bn bid in 2015 to acquire Worldpay – and the value of Ingenico today: a mere €3.6bn. Worldpay did, of course, call it right, selling ultimately last August for £9bn to Vantiv in the payments deal of the year.
This year’s mega payments deals again trump bank M&As for interest and column inches, including Worldline’s €2.3bn deal for SIX and PayPal’s $2.2bn deal for iZettle. Meantime, while Ingenico’s share price is down by 40% for the year to date, Wirecard’s market cap of $19.2bn is ahead of Deutsche Bank ($17.2bn) and Commerzbank ($9.6bn). While Deutsche and Commerzbank are down by 53% and 46% for the year to date, Wirecard is up by 42%.
Looking to 2019, expect more positive headlines from Toast. Razorpay will, no doubt, continue to be in the news. Others to keep an eye on include Veem and Paystack.