A new survey, conducted by Bank Director, which is a leading information resource for the directors and officers of financial institutions, and funded by Crowe LLP, public accounting, consulting and technology firm, has found that many banks invest a major share of the profits received from tax break .
In the survey, titled 2019 Bank M&A Survey, 37 per cent said their bank invested the amount in new growth initiatives, while 36 per cent invested in new technology.
The focus on new growth initiatives is consistent with the respondents’ view of bank M&A. Fifty-seven percent indicate they are open to bank acquisitions but prefer to focus on organic growth opportunities. “With the current state of the economy and improved regulatory and tax environments, bankers are focused on what they can control: new growth initiatives,” said Rick Childs, a partner with Crowe.
“While the pace of acquisitions might begin to slow, banks should continue to explore potential deals, as M&A remains a catalyst for growth,” adds Al Dominick, CEO of Bank Director.
About 25 per cent respondents said their bank used some of the tax windfall to raise salaries, and 19 per cent paid employees a one-time bonus.
The survey was carried out in September and October 2018, and surveyed 184 independent directors, chief executive officers and senior executives of U.S. banks to examine industry attitudes on issues impacting growth, including the U.S. economy and regulatory environment.
The other findings are the following:
- Seventy-six percent expect the U.S. economy to grow modestly through 2019.
- Forty-six percent expect increased tariffs to have a moderate impact on their bank’s business customers, and 38 per cent foresee little impact.
- More than half believe the current environment is more favourable for deals.
- Fifty-one percent say they’re likely to acquire another bank by the end of 2019.
- Thirty percent believe their bank is more likely to acquire as a result of the Economic Growth, Regulatory Relief and Consumer Protection Act, which rolled back some regulations for the banking industry. Two-thirds indicate that regulatory reform will have no impact on their M&A plans.
- Acquiring deposits is very attractive to today’s potential dealmakers: 71 per cent say the potential target’s deposit base is a highly important factor in making the decision to acquire.
- Fifty-three percent say branch locations in attractive or growing markets are highly important, and 49 per cent place high value on lending teams or talented lenders at the target.
Despite more sympathetic regulators and the passage of regulatory relief, 72 per cent say their bank’s examiners have grown no less stringent over the past two years.