Bank managers in the U.S. are less likely to engage in mergers and acquisitions this year as regulators heighten scrutiny on potential deals and sellers wait for higher valuations, according to a KPMG LLP survey.
About 13 percent of executives said they were “very likely” to take over another firm in the next year, compared with 21 percent in 2012, according to a report today from the audit, tax and advisory firm. Respondents also are less apt to sell assets, with 8 percent saying they anticipate divestitures, down from 13 percent last year.
“The regulatory risk of getting a deal nixed at the 11th hour is certainly higher than a year ago,” Brian Stephens, head of KPMG’s banking and capital markets practice, said in a phone interview. Leaders of smaller lenders that may sell themselves are saying, “I’ve gotten through the worst of times, and I see better times coming, so why do a deal now?”
While shares of banks that survived the financial crisis have rebounded along with profits, the firms won’t avoid increased scrutiny from regulators, according to the survey. More than half of the rules mandated by the 2010 Dodd-Frank Act haven’t been completed and the Consumer Financial Protection Bureau is stepping up oversight of the industry, Stephens said.
Regulators were deemed the single biggest barrier to mergers, at 57 percent, up from 40 percent a year earlier, according to the survey. Respondents also cited regulatory and legislative scrutiny as the biggest impediment to growth, at 72 percent, compared with 69 percent in 2012.
“The potential acquirer is put through a lot of scrutiny before any deal happens,” Stephens said. “Regulators are looking at this as a simple question of risk -- is it increasing or decreasing the risk profile (JPM:US)?”
Most respondents, 76 percent, said their companies will report revenue increases fueled by growth in lending, asset management and so-called cross-selling of financial products, according to the survey. About 31 percent said they anticipated having more employees a year from now, compared with 39 percent a year earlier.
KPMG said it surveyed 100 bank executives online in March, and that about 80 percent worked at firms with at least $1 billion in annual revenue.
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