Jap Bank, America’s largest mutual financial savings bank, goes public in what might be a $2 billion IPO. The bank mentioned in its prospectus that one of many causes for the transfer is to have the ability to “pursue opportunistic acquisitions” in its present and bordering markets. Following the IPO announcement, Jap Bank CEO Bob Rivers instructed The Boston Enterprise Journal that he predicts the bank will develop to $40 billion in complete belongings over the subsequent decade; it has about $11.6 billion now.
All of this implies that Rivers is seeking to make an enormous deal occur. Let’s check out who Jap may purchase or merge with.
Picture supply: Getty Photographs.
A merger of equals
A merger of equals might be within the playing cards if Jap appears to be like on the $13.2 billion asset Berkshire Hills Bancorp or the practically $12 billion Impartial Bank Corp., the mother or father firm of Rockland Belief.
Whereas all of those banks value their model, a merger of equals would make a certain quantity of sense. In Massachusetts, their house state, Jap, Berkshire, and Impartial collectively solely held about 6% of deposit market share, based on the FDIC, falling woefully behind different massive banks comparable to State Street, Bank of America, Residents Monetary Group, and Santander. And it is solely going to get extra aggressive. In 2018, JPMorgan Chase, the biggest bank within the U.S., introduced that it might open 50 retail branches within the Boston space, an initiative that’s exhibiting nice promise up to now. JPMorgan CEO Jamie Dimon even mentioned he thinks the bank might someday be a high three deposit market share holder in larger Boston. Not too long ago, PNC Monetary Companies Group additionally launched a retail presence in Boston. Competitors is just getting extra fierce, so it is perhaps in the very best curiosity of Jap to workforce up with both Impartial or Berkshire.
I think Jap would favor to companion with Impartial if it had its alternative. Not solely does the bank have an insurance coverage division that might pair with Jap’s, however Impartial would assist Jap higher fill in its footprint within the southern a part of Massachusetts and Cape Cod. Impartial might additionally give Jap extra of a presence in Worcester, the second-largest metropolis in Massachusetts.
However the massive query is whether or not Impartial can be prepared to companion. The bank itself has made seven acquisitions over the previous decade, and based mostly on the corporate’s quarterly earnings calls, it looks as if CEO Chris Oddleifson actually enjoys working the bank and making acquisitions, so it is unclear if he’d be prepared to relinquish management.
Berkshire Hills may be within the playing cards, though in merging with it Jap can be venturing off into an enormous geographic enlargement method past its regular footprint — Berkshire Hills has a presence that features upstate New York, New Jersey, and Pennsylvania. However the bank does even have an enormous presence in Worcester and might be so much cheaper than Impartial. Impartial traded at 182% tangible ebook value at Wednesday’s shut, whereas Berkshire Hills traded for lower than 47% of tangible ebook value.
If Jap does not do a merger of equals, then two different banks it’d have a look at are Brookline Bancorp or Meridian Bancorp. Each are within the $6 billion asset vary, have a number of branches overlapping with Jap’s footprint, a heavy emphasis on business loans, and a presence in different New England states.
For some purpose, I have a tendency to listen to analysts and different speculators say that Brookline is extra prone to get acquired, however each strike me as considerably related establishments. Curiously sufficient, on the finish of the primary quarter Brookline took an enormous credit score provision to cowl potential loan losses, whereas Meridian raised its quarterly credit score provision little or no compared. This struck me as odd contemplating each are business gamers in the identical market. Presently, Brookline is buying and selling at roughly 100% of tangible ebook value, whereas Meridian is buying and selling at about 77% of tangible ebook value.
One other doable acquisition goal for Jap might be HarborOne Bancorp. It’s kind of smaller at $4.1 billion in belongings, however has the same footprint as Jap, with most of its enterprise in Massachusetts and a wholesome presence in New Hampshire and Rhode Island as effectively.
Wait and see
Jap first must conduct its IPO to boost the extra capital. Then it might want to assess the market to see the place the economic system stands and the standing of the coronavirus. Situations change by the day, so the bank may wish to wait till issues stabilize until one of many banks on its radar approaches it seeking to promote. However make no mistake, an enormous shakeup to the Boston banking scene might be coming.