Merger Mania: Big Banks Absorb Little Banks

It’s starting to look a lot like the '80s again.

Michael Douglas is back as Gordon Gekko, the Redskins have a good football team, and banks are increasingly looking to snap up weaker banks to grow stronger. Who are the big merger players and what are they up to?

Let’s set the stage. With the failure of Bradenton, Fla.-based Horizon Bank, that’s a total of 119 bank failures in the U.S. in 2010 — the highest amount since 1992. The Federal Deposit Insurance Corp. says another 829 banks are on its “troubled bank list” as of Aug. 31. So right up front there’s a burgeoning list of troubled banks — and soon-to-be-troubled banks — that could be takeover targets.

First on our list of buyers is PNC Bank (Stock Quote: PNC). The Pittsburgh-based bank is in what bank merger watchers call the "sweet spot" — big enough to throw its weight around and grab smaller, weaker banks, but not so big that it falls under the watchful eye of Uncle Sam, who has strict regulations on what mega-banks can and cannot do in terms of merger activity. Big banks like Bank of America (Stock Quote: BAC), JPMorgan (Stock Quote: JPM) and Wells Fargo (Stock Quote: WFC) each own 10% of total U.S. bank assets, making them ineligible to grow any larger under statutes laid out by the federal government.

But not PNC. A big regional bank like PNC is primed to swoop in and pick up the growing number of banks suffering depressed market values thanks to the sour economy and tight credit market. The consulting firm Keefe, Bruyette & Woods, Inc. says banks like KeyCorp, SunTrust Bank, and Regions Financial Corp. could be pick-off targets for PNC, and other big regional banks like U.S. Bank (Stock Quote: USB).

If you liked this article you might like

Dividend Funds Need to Be in Your Life

Unlock the Secrets Behind Bitcoin Investing

Questions You Must Ask a Car Salesperson to Avoid Getting Ripped Off Big-Time

5 Surefire Ways to Destroy Your Marriage

Best States for Retirement in the U.S.