Reg relief will fuel M&A, but long-term gains may prove elusive
By Karen Shaw Petrou
So the regulatory relief bill is signed — game on. With statutory protection from add-on regulatory requirements, bank holding companies between $50 billion and $250 billion — and maybe even more — are about to click on the “ready to check out” button to buy a bank or two. Is this shopping spree a sign of undue profitability, as critics will surely allege? On the contrary, banks generally buy other banks because they’ve run out of cost-cutting or, even worse, revenue-enhancing options to boost profitability. The consolidation scramble should be seen for what it really is: the only way to make mid-sized bank holding companies more than modestly profitable as long as rates are low, the economy is torpid and the rules are still about the same.