Three banks from Connecticut are circling Boston in a hunt for takeover candidates, putting hometown lenders on alert as analysts expect deal activity to heat up for the duration of 2010, The Boston Business Journal reports.
Analysts at Janney Capital Markets recently put together a list of nine Massachusetts banks as potential takeover candidates. The largest banks on that list, in terms of assets, were Boston Private Financial Holdings Inc., the holding company for Boston Private Bank & Trust; Independent Bank Corp., the parent of Rockland Trust; and Brookline Bancorp Inc., BBJ said Friday on is Web site.
People’s United Financial Corp. has the most ammunition, with more than $2 billion in excess capital to deploy. Based in Bridgeport, Conn., People’s United bought troubled Butler Bank in April and then this month unveiled its acquisition of LSB Corp., the parent of RiverBank in North Andover.
Analysts expect more deals from People’s United, whose board recently pushed out top executive Philip Sherringham after he moved too slowly on acquisitions. Interim CEO John Barnes now is seen as the lead contender for the job after striking deals to buy RiverBank and Smithtown Bancorp in Long Island.
J.P. Morgan analyst Steve Alexopoulos said People’s United would need to acquire $25 billion in assets to reach fully levered status. In a recent research note, he said he believes the bank could eventually hit the $50 billion asset mark, up from its current level of $22 billion.
But People’s United isn’t the only Connecticut bank on the prowl. Webster Bank, based in Waterbury, Conn., also wants to expand in Boston after opening a flagship branch in the downtown financial district.
Bill Dickey, co-head of Sandler O’Neill & Partners‘ investment banking group, said Webster Bank’s stock may be compelling currency for a transaction because it’s on the rise after being battered by losses on problem loans.
“It’s an attractive piece of paper,” Dickey said. “They’ve had some issues, but they’ve come through them now.”
A selling bank effectively could double dip by accepting Webster shares in a takeover. The takeover bank would first get a premium for its assets and then potentially recognize further gains if Webster shares rise from better earnings and improved market share in New England.
“If you sell for stock, you really haven’t sold your bank, but you’ve made an investment in another bank’s shares,” Dickey said. “But you have to make sure you like the investment.”
Keefe Bruyette & Woods analyst Damon Delmonte said he sees People’s United, Webster and NewAlliance Bancshares Inc. – all from Connecticut – making acquisitions to enhance their market share in Boston.
“They all want to be the premier New England franchise,” Delmonte said.
But that doesn’t mean Boston-area banks are standing flat-footed. Eastern Bank, a mutual bank, paid a hefty premium to buy Wainwright Bank. Brookline Bank, according to people familiar with the situation.
While some observers may see Brookline Bank as an acquisition target, Delmonte sees the institution as a buyer, too. The bank has an abundance of capital to buy other banks. Before Paul Perrault landed at Brookline as its CEO, he earned his stripes as a dealmaker, rolling up banks while he ran Vermont-based Chittenden Corp. He ultimately sold Chittenden to People’s United.
Sandler O’Neill’s Dickey said there are plenty of takeover candidates in the Boston market with less than $1 billion in assets. He sees those banks looking for partners as they face greater regulatory burdens and higher deposit insurance premiums from the Federal Deposit Insurance Corp.
“It’s going to be harder for them to keep profits at historical levels,” Dickey said.
Bob Hutchinson, an investment banker at Sterne Agee & Leach Inc.’s Boston office,
