NEW YORK – Few investors and bankers could have imagined regulators would allow the largest US lender to buy another bank and become even bigger. Then, Jamie Dimon beat the odds, clinching a deal to buy First Republic Bank on Monday.
Now, the JPMorgan Chase & Co. CEO expects more deals will follow in the industry.
“Banks will consolidate,” Dimon told analysts on a conference call on Monday hours after winning a government auction for the San Francisco-based lender, which was seized overnight by regulators.
The approval of the JPMorgan deal — which two months ago would have seemed unthinkable given the “too big to fail” stigma of 2008 — could signal a potential shift in stance from regulators as banks face more stress in a worsening economy.
Large regional banks could merge with each other to better compete with banking giants, while small and mid-size lenders could also be taken over as their customers flee to larger institutions.
Dimon is not alone. Several analysts, industry executives and investors said they believe the March banking crisis has set conditions for a long-predicted round of industry consolidation to finally happen. The reasons are many, they said.
Lenders that have a high proportion of deposits that are not covered by federal deposit insurance are under pressure amid a flight to safety and may need to raise capital.
More costly regulations are likely to follow in the wake of the crisis, which could further erode banks’ bottom lines and force them in the arms of a suitor.
And as a recession looms and economic activity slumps, rising defaults in the commercial real estate market and shrinking profits may also spur tie-ups. – Reuters
