Foreign Banks Prowl for U.S. Acquisitions
NEW YORK (TheStreet) -- Judging by recent headlines, foreign banks are increasingly on the lookout to acquire U.S. banks.
Banco Santander ( STD), BBVA ( BFR), and Banco do Brasil all recently announced or hinted that they are scoping out acquisitions of U.S. banks, and Gerald Adolph, a senior partner at consulting firm Booz & Co. doesn't expect the deal flow to end there.
"A lot of non-U.S. companies are targeting the opportunity to get into the U.S.," says Adolph in a video interview with TheStreet. "In the capital markets, as opposed to retail, being global has distinct advantages. The U.S. was expensive to enter for companies outside the U.S. and frankly it wasn't very welcoming. There is not as much heat being raised anymore."
U.S. banks are in dire need of capital so it's an opportune time for foreign banks to buy in the U.S. right now, says Chip MacDonald, a partner at Jones Day. "I'm surprised there are not more foreign banks looking at U.S. acquisitions," he says. Banco Santander's pursuit of M&T Bank ( MTB) is one example of how foreign banks can enter the U.S. market through acquiring a somewhat troubled regional bank, as Santander did in this case with Sovereign, and then leverage that presence to make deals for healthier institutions. BBVA, which acquired Compass Bancshares in 2007, could pursue a similar strategy, but it is more likely to go after failed or problem banks. Banco do Brasil does not have a foundation in the United States yet. So the bank may be more likely to buy a community bank to obtain a U.S. bank charter, deposits and holding company status, says MacDonald. Once the bank has a foundation, Banco do Brasil could then target a distressed regional bank or get in the bidding for any failed banks. "Look at [the] problem bank list. I don't know [that] they [Banco do Brasil] would want to buy a bank as big as Fifth Third Bancorp ( FITB). They could buy a smaller bank then a larger one," MacDonald says. "I don't think they would be able to do a TARP bank." Banco do Brasil is looking at 17 possible U.S. takeover targets and could acquire two of them, according to a Reuters report. It has hired Royal Bank of Canada to advise on deals, according to Bloomberg. "The U.S. is still the biggest market in the world, and in a country the size of Brazil where are you going to grow? Where can they find meaningful growth?" asks Bart Narter, senior vice president with the banking group of consulting firm Celent. "It is certainly one of the better options. They [Banco do Brasil] could also invest in Argentina, Mexico, Portugal or maybe Chile."
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