I'll Give You $1 for That Failed Bank
People's United Financial Inc. wanted to buy failed banks on the cheap. Instead, it struck a deal to buy a healthy equipment-leasing company.
Last Monday's change of plans by the Bridgeport, Conn., bank-holding company underscores a problem with the growing pile of terminally ill U.S. banks being wrestled with by the Federal Deposit Insurance Corp.
Some are in such bad shape that potential buyers won't touch them at any price, even if the government agrees to eat losses on the failed bank's bad loans. In addition to their depleted capital, many seized banks operate in areas with sluggish growth prospects, are puny and are loaded with expensive deposits gathered through brokers that are likely to leave when the acquiring bank reins in interest rates, some bankers complain.
Philip Sherringham, chief executive of People's United, said it is getting harder to find the dream deal that bank officials hoped to hatch from a wrecked bank. The supply of ideal targets—sensible deposit-gatherers that fatally "overextended" their loan portfolio—is slim and the competition fierce, he said.
The company's roots go back to 1842. Its biggest deal was the 2008 purchase of Crittenden Corp., including six banks owned by the Burlington, Vt., company. The financial crisis has given People's United an appetite for dying banks that nevertheless might have some valuable pieces.
But of the 124 banks to fail so far this year, many of those put up for sale by regulators as part of the seizure process "are of very poor quality," said Norm Skalicky, chief executive of Stearns Financial Services Inc. "It's not as if you can walk in and you are in business."
Hahahahaha you don't say! Here I thought it would be totally easy to take a bank that was seized by regulators, pumped full of TARP, and bloated on bad commercial real estate loans and turn it into the next Bank of America.
Fifth Third's CEO even went so far as to imply recent FDIC seizures are total garbage:
Fifth Third Bancorp CEO Kevin Kabat complained at an investor conference recently that the "relative quality…of available FDIC transactions have really not been very attractive from our perspective."
Uh, this might be a good time to plug Bank Fail Friday. *sigh*