NEW YORK (TheStreet) -- Strong market fundamentals should harness a rebound in bank merger and acquisitions, but expect the improvement to be slow and steady, says Sharon Weinstein, Deloitte's managing director and head of Financial Institutions Corporate Finance.
"What we're seeing is a lot more deals being done in stock, because the market is so strong," Weinstein said Wednesday on the sidelines of Mergermarket's Financial Services M&A Symposium at the University Club of New York City. "When we think about the strategic deals being put together, what we're really seeing is investors saying 'gee they like these deals because they're giving double EPS accretion, they have very limited tangible book value dilution, and the stock price is being rewarded for sound deals.'"
Weinstein went on to say that the significant run-up in the market has been triggered by strong fundamentals and economic indicators moving in the right direction. The housing market has begun to recover and the low interest rate environment is now moving in a direction that's increasing, which helps banks benefit from a steep yield curve. She observes that retail investors are now putting a lot of money into the market, much more so than they have for quite some time after the financial crisis, and that they will continue to do that as long as the economic and fundamental improvements maintain their current trajectory and the political climate doesn't deteriorate.
Although bank M&A is heating up, Weinstein concludes however that the uptick isn't taking place as quickly as one might hope because of regulatory uncertainty. "Deals are just taking such an inordinate amount of time to get done because the regulators are focused on systemic risk, money laundering, BSA and fair lending, and diligence is becoming much more important," she explained. "The bank boards are very burned out, there's a lot of regulatory pressures ... higher compliance costs. I think we're going to see a rebound, but I don't think it's going to be this huge wave of deals."
--By Andrea Tse in New York