Produced by Gregory Bobillot, Ben Marino and Donell Newkirk.
The status quo in American retail banking is about to change.
I don't think so, but please carry on.
We're used to the national banking landscape being dominated by the four huge, diversified national banks, each with over $1tn in deposits - JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.
And that is how it's going to stay. The big four plus a handful of banks with deposits in the low hundreds of millions, and a whole bunch with deposits in the 10...
And that is a fragmented market, unlike any other. It gives a big edge to the mega bank oligopoly. It's clear that the number of banks is going to shrink. And the size of the smaller banks is going to grow.
OK, but how?
Mergers and acquisitions. And the all stock no-premium premium merger of two of the biggest of the small banks, BB&T and SunTrust has pointed the way.
That is just one deal.
Yes, but bigger banks have the scale and the tech budget to play at the big table. They can save costs, access more data, invest more, and innovate faster. And the Trump administration has shown no sign in getting in the way of these deals.
But it's not as easy as all that. The merger will hit the skids, as the two management teams get in a squabble about which side is really in charge. It's not all about regulatory and financial possibilities. It's also about cultural clashes.
Granted. But with the BB&T and SunTrust merger, shares in both banks rose. Money talks. More bank deals to come.
Yes, money does talk. And let me tell you, being the CEO of a mid-sized bank is a cushy gig. The CEOs will want to be paid a fat premium to give that up.
Well, SunTrust and BB&T did it.
It's a one off. Integrating operations takes time if it can be done at all. Mergers just face too many difficulties and uncertainties. Sometimes one plus one doesn't equal two. It certainly doesn't equal more than two.
Your math is always wrong. I'd sum it up a different way. Consolidation equals a more rational, more competitive, more efficient banking partner.
It is amazing to me that there is still anyone who believes that mergers have something to do with rationality.