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Big Bank Bids Headed For Hill Hearings?

Tech mergers have been in the crosshairs for lawmaker scrutiny – particularly over antitrust concerns.

Now, it may be the banks’ turn.

Earlier this week, California Congresswoman Maxine Waters (a Democrat from California) said in a statement that the $11.6 billion proposed merger between PNC and BBVA’s U.S. operations should be examined on antitrust concerns.

As reported, the deal would create the fifth-largest bank in the U.S.

Waters, of course, serves as chair of the House Financial Services Committee. And the committee oversees, among other things, the financial services sector. The incoming Biden administration should “take a hard look” at the proposed deal, and the incoming Department of Justice Antitrust Division should conduct a “stringent review,” she said.

Separately, Senator Elizabeth Warren last month wrote a letter to the Department of Justice urging an examination and strengthening of bank merger review guidelines.

The stage may be set for a ramp-up in dealmaking, and also in oversight/scrutiny of those deals.

If it were to go through, the deal would be the largest one in more than a decade. The combined bank, as reported, will have a presence that spans 24 states and sports an asset base of roughly $560 billion.

In another recent but much smaller acquisition, First Citizens BancShares Inc. said it would buy CIT Group Inc. for $2.2 billion in October. And last year, the BB&T Corp. and SunTrust Banks Inc. merged in a deal that spawned Truist Financial Corp.

Here, then, we’re seeing deal-making that does not involve the marquee names of U.S. banking – J.P. Morgan, Citigroup and Wells Fargo among them. But still, activity may ramp up. S&P Global noted 219 bank and thrift deals in 2019 through the end of October; so far this year, there seem to have been slightly more than 90.

At first glance, the pandemic seems a natural headwind to M&A activity, as companies want and likely need to conserve cash. Banks, especially, are in the midst of fine-tuning operations as the great digital shift continues. But that shift, too, will perhaps be the tailwind to more deal-making when the virus starts to recede.

As we saw with the BBVA/PNC deal, scale matters. And as we reported, it’s relatively easier to buy scale than to build it. Lower tax rates, currently in place but likely to sunset in the Biden administration, may spur more deals. And digital remains a siren call for banks of all sizes, and for regional players. That’s especially true with digital-first cross-pollination. BBVA, for its part, has been working with Google to offer consumers a digital bank account through Google Pay.

Bankrate Chief Financial Analyst Greg McBride said in comments on that latest headline-grabbing deal, which has invited Rep. Waters’ caution, that “PNC’s acquisition of BBVA’s U.S. banking operations continues the consolidation among regional players being necessitated by low interest margins and the digital arms race in banking. Scale matters more than ever, especially with the growing technology investments needed to keep pace with the biggest banks and FinTech startups.”

More deals – and for the dealmakers, more questions – likely lie ahead.

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