TCF Financial Most Likely Regional Bank Seller, Deutsche Says
BankUnited Inc. (BKU), Comerica Inc. (CMA), TCF Financial Corp. (TCBI), First Republic Bank and Texas Capital Bancshares Inc. are the most likely regional lenders to put themselves up for sale based partially on how much their chief executive officers stand to make from a deal, a report found.
The CEO would get 9.9 times current compensation at First Republic in San Francisco, 7.3 times at Comerica and 5.1 times at Texas Capital, both based in Dallas, according to a Deutsche Bank AG (DBK) report released Feb. 21.
Deutsche Bank analysts led by Matt O’Connor said they wrote the report “with investors wondering when bank M&A activity will pick up.”
Regional banks are under pressure as new regulations and capital requirements squeeze earnings, analysts including Christopher McGratty of KBW Inc. have said, raising the possibility of a wave of mergers. Conditions are in place for a rebound in deal activity, Ralph Schlosstein, CEO of Evercore Partners Inc. (EVR), said Feb. 21 in an interview on Bloomberg Television.
Even with a payout of only 1.1 times the CEO’s salary, TCF Financial is the regional lender most likely to be sold this year due to “uncertainty over CEO succession and a net interest margin that is likely to be more pressured than peers starting in 1-2 years,” O’Connor said.
TFC Financial CEO William Cooper, 69, has said he would sell the Wayzata, Minnesota-based firm if the deal was in the best interest of shareholders. Cooper stands to make $9.6 million from a sale, according to the report, which was based on 2011 data.
“Somebody comes along and offers a great deal though, we would be happy to sell the bank,” Cooper said on a Jan. 30 conference call. “That’s always been our philosophy and continues to be.”
TCF Financial, with 430 branch offices and $18.2 billion in assets, reported last month that fourth-quarter profit increased 43 percent to $23.6 million from a year earlier. Net interest margin, the difference between what a bank pays for deposits and charges for loans, climbed 87 basis points to 4.65 percent, the company said.
“Mr. Cooper has a contract through 2015 and he certainly expects to fulfill that,” Jason Korstange, a spokesman for TCF Financial, said in response to the report. “A lot of things can happen in two years.”
Greg Berardi, an outside spokesman for First Republic, declined to comment on the report, as did BankUnited’s Mary Harris and Texas Capital’s Heather Worley. A spokesman for Comerica didn’t immediately respond to an e-mail and phone call requesting comment.
Aside from TCF Financial, regional bank consolidation may take a few years, O’Connor said in the report.
“We expect greater sale activity in the medium and longer- term,” O’Connor said. “This reflects likely further stock price appreciation and earnings power” as the economy improves, he said.
BankUnited CEO John Kanas, 66, stands to make $10.4 million, or 4.3 times his 2011 compensation package, if the Miami Lakes, Florida-based lender is sold, according to the report. The bank decided to remain independent last year after putting itself up for sale and failing to get an offer that met the board’s expectations.
Ralph Babb, 64, CEO of Comerica, would make $51.3 million, according to the report, while George Jones, head of Texas Capital Bancshares, would collect $7.3 million, or 5.1 times his compensation in 2011. James H. Herbert, CEO of First Republic, would make $36.2 million if his bank was sold.
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