UPDATE 1-KeyCorp, Regions may sell as bank M&A returns: KBW

* Says consolidation may return within 12-18 months

* Favors potential buyers; selective of sellers * Reintroduces KBW Takeover List; creates 3 other lists (Recasts; adds details, link to factbox)

July 1 (Reuters) - Keefe, Bruyette & Woods said KeyCorp (KEY.N), Regions Financial (RF.N) and Synovus Financial Corp (SNV.N) may look to sell themselves as a wave of open-bank consolidations emerges within the next 12 to 18 months.

The wave is likely to be spurred by improved asset liquidity and price certainty as well as limited organic growth opportunities, analysts at the brokerage said.

Increased profitability headwinds and higher capital needs, amid a slow recovery in the industry, will likely trigger conversations by bank managements on whether or not to maintain independence, said KBW analysts, including Christopher McGratty.

"More than typical conversations may occur, particularly in light of our view that many banks may be unable to generate acceptable returns above their cost of capital," they added.

The analysts reintroduced the "KBW Takeover List," and created three distinct lists for investors, that is, "The KBW Potential Buyers List," "The KBW Potential Sellers List," and "The KBW Potential Buyers Who Could Become Sellers List."

For a related factbox, click [ID:nSGE6600KJ]

"We also believe economics are more likely to favor the buyers than the sellers, particularly early on in the consolidation cycle," they said.

BB&T Corp (BBT.N), City National Corp (CYN.N), First Horizon National (FHN.N) and PNC Financial Services (PNC.N) could be potential buyers, the analysts said.

Ability of the 'Big 4' banks -- Bank of America (BAC.N), Citigroup (C.N), JPMorgan Chase (JPM.N) and Wells Fargo (WFC.N) -- to go for depository acquisitions may be limited given upward pressure on national deposit caps and increased regulatory concerns on "too big to fail," they said.

The U.S. House of Representatives Wednesday approved a landmark overhaul of financial regulations, setting up an "orderly liquidation" process that the government could use in emergencies, instead of bankruptcy or bailout, to dismantle firms on the verge of collapse.

The goal is to end the idea that some firms are "too big to fail" and avoid a repeat of 2008, when the Bush administration bailed out AIG (AIG.N) and other firms, but not Lehman Brothers LEHMQ.PK.

"We believe non-bank acquisitions for these institutions may be considered, as we believe JPMorgan may continue to invest in businesses such as investment banking, asset management and private banking on an international scale," KBW analysts said.

They also favor those banks on the list of today's potential buyers who may ultimately become tomorrow's sellers. They feel TCF Financial Corp (TCB.N), MB Financial Inc (MBFI.O) and First Midwest Bancorp (FMBI.O) fall into that category.

The analysts are, however, uncertain about the exact timing of the return of voluntary consolidation, after the dearth of deals the market saw during the financial crisis. (Reporting by Tenzin Pema and Anurag Kotoky in Bangalore; Editing by Maju Samuel and Don Sebastian)