NEW YORK ( TheStreet) -- Strong capital levels and solid core earnings are two factors that banks must have if they want to participate in bank consolidation as an acquiror.

Eighteen months ago, many banks were scrambling to raise capital; now those same banks are flush with capital and searching for growth - partly through acquisitions, said Eric Heaton, managing director and co-head of financial institutions group at Deutsche Bank.

Banks will focus on growth and ultimately the viability of their business models, Heaton said, during an investment banker panel discussion at the second annual SNL Financial Bank M&A Symposium held Tuesday in New York. The panel included Heaton and four other banking experts.

>>Bank CEOs Play Down M&A

As a sign of the changing times, Capital One ( COF) is the same size as Nations Bank was in 1995, PNC Financial Services ( PNC) has equaled Citigroup's ( C) size in 1995, he noted.

These banks and others are "poised to drive consolidation," Heaton said.

Foreign banks, particularly European banks which are large and focused on growth, are also looking to expand in the U.S. as Europe's economy remains stagnant, he said.

Andrew Senchak, Keefe, Bruyette & Woods vice chairman and president, said that deal activity will pick up where there is lower concentration of banks, but the likely "new emerging players" in M&A will be mid-size regional banks like First Niagara ( FNFG), East-West Bancorp ( EWBC) and MB Financial ( MBFI).

Senchak predicts that deal volumes could reach post-90s recession levels, "But what will valuation look like?" he posed to the audience. He expects deal prices to be 2 times book value at best.

However, the economic recovery will be the determining factor on the pace, intensity and ultimately price of new deals. Senchak expects the economic recovery to be "abysmal," he says.

Brian Sterling, Sandler O'Neill & Partners co-head of investment banking, said that there is capital available even for troubled institutions.

Sandler has advised on transactions where the banks at times had non-performing loans above 10% of total loan book, however investors have been willing to invest in those banks that have "significant capital pressures, but strong franchises," he said.

--Written by Laurie Kulikowski in New York.

To contact the writer of this article, click here: Laurie Kulikowski.

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