2 regional banks agree to merge in $10.9 billion deal
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Fifth Third announced Monday that it would acquire Comerica for $10.9 billion in stock in a deal that would create the nation's ninth-largest bank.
Why it matters: The merger could be the start of a long-anticipated consolidation among the bigger regional banks. It also reflects an expectation that the Trump administration will look more favorably on such deals.
The combined entity will operate in "17 of the 20 fastest-growing markets in the country, including key regions in the Southeast, Texas and California," the banks said.
- Fifth Third is based in Cincinnati, while Comerica is headquartered in Dallas.
- Comerica recently came under pressure from an activist investor pushing for a sale of the bank, per the Wall Street Journal.
Zoom in: The acquisition would give Fifth Third, which has a strong franchise in the Midwest, a bigger presence in the Southeast, as well as a major foothold in Texas. The bank said it expected more than half of its branches would be in the Southeast, Texas and California by 2030.
- Fifth Third said the combined entity would also be significantly stronger in payments and wealth and asset management.
- "We view the acquisition as providing significant scale benefits and strengthening [Fifth Third's] commercial banking operations, though [Comerica's] geographic footprint slows [Fifth Third's] shift into attractive Southeast markets," writes Alexander Yokum, equity analyst at CFRA Research.
The big picture: While Fifth Third and Comerica are huge institutions, they remain in the shadow of banking behemoths like JPMorgan Chase and Bank of America, which dominate the lending and consumer businesses.
- The five biggest banks have more than a 40% share of deposits in the U.S.
In response to those competitive challenges, analysts and investors have long called for more mergers among the second tier of U.S. banks.
- And regional bank M&A has picked up recently: PNC Financial Services is buying FirstBank Holding of Colorado for $4.1 billion, and Pinnacle Financial Partners and Synovus Financial are merging in an $8.6 billion deal.
- The Trump administration has pledged to have a lighter touch on the regulation of banks.
- "I don't think that the current administration is approving things that the prior administration wouldn't have, but they are getting the approvals out faster," Fifth Third CEO Tim Spence told the Financial Times.
What we are watching: Potentially a wave of bank deal-making — and any response from regulators.
Editor's note: This story has been updated with additional details.
