Bank M&A May Hinge on Deposit Cap Rule

"At Wachovia and Wells they've got overlap in Texas and California, so you could just sell some deposits with branches," he says.

JPMorgan Chase may take advantage of the law's loopholes if it does another bank acquisition. With the addition of WaMu, the New York bank's deposit share is 9%, according to Fox Pitt Kelton Caronia Cochran Waller analyst David Trone.

After speaking with the company's CFO Michael Cavanaugh, Trone believes the bank wants to do another deal by the end of the year. JPMorgan Chase is interested in targets primarily in the Southeast, but also New England and the Midwest, he writes in a note last week.

But at 9% deposit market share, JPMorgan Chase could only take on another roughly $75 billion in deposits, meaning smaller outfits like Synovus (SNV Quote), First Horizon (FHN Quote) or Colonial Bancorp (CNB Quote), Trone writes.

But WaMu's status as a thrift will likely allow for JPMorgan Chase to scoot around the limit. The New York bank, which is still digesting its takeover of Bear Stearns from this spring, paid the Federal Deposit Insurance Corp. just $1.9 billion for WaMu's deposits, branches and select assets.

Excluding WaMu's deposits, JPMorgan Chase's deposit market share is 6.4%, allowing the company to acquire another $263 billion of deposits before hitting the cap, Trone writes. That includes target companies like Regions Financial (RF Quote), SunTrust Banks (STI Quote) or BB&T (BBT Quote) -- each of which would provide "substantial presence" in the South, Trone writes.

In the Midwest, JPMorgan has a bit more flexibility to do acquisitions without exceeding the deposit cap through targets such as KeyCorp (KEY Quote), Fifth Third (FITB Quote), Marshall & Ilsley (MI Quote), Comerica (CMA Quote) or Huntington Bancshares (HBAN Quote), he writes.

A bank spokesman declined to comment regarding deposit cap information or further acquisitions.