The M&A Holdouts
With the flurry of bank M&A dealmaking lately, you’d think the only way to grow is through an acquisition. Of course, that’s not the case.
Take Synovus Financial Corp., a $55 billion banking company in Columbus, Georgia. Answering a question during its first quarter earnings call last month, newly installed CEO Kevin Blair said the No. 1 way the bank wants to invest capital is in organic growth. With excess liquidity and improved stock valuations, analysts increasingly are asking bankers how they plan to deploy that capital.
Blair believes the bank’s footprint provides ample opportunities.
And while a lot of banks make acquisitions to cut costs, Synovus already has been generating efficiencies, he noted. The bank has reduced staffing by about 3% over the last two quarters and managed to bring down its reported efficiency ratio to 55% in the first quarter of 2021, down almost three percentage points compared to a year ago, according to the company’s earnings release. Blair didn’t rule out the possibility of M&A but brought up some of the risks, such as a cultural mismatch or customer attrition. “I would just reiterate that we think our best investment today is just an investment in Synovus," he said.
Pinnacle Financial Partners also emphasized organic growth on its recent first quarter conference call, projecting loan growth in the “high single digits” for 2021. It helps that the $35 billion bank’s headquarters are in rapidly developing Nashville, Tennessee.
As banks announce combinations with other banks and as investors react positively much of the time, those that aren’t doing M&A may feel compelled to justify their positions.
According to Christopher Marinac, director of research at the investment bank Janney Montgomery Scott, banks don’t have to be a certain size to do well. Boards must consider all their strategic options, and M&A may not be the best one. “Acquisitions are a distraction,’’ explains Marinac. “They add risk.”
I agree. There are multiple paths to success. Let every bank find its own way.
• Naomi Snyder, editor for Bank Director