By Dan Wilchins
NEW YORK (Reuters) - As rising interest rates crimp U.S. bank margins, smaller banks will be more inclined to sell themselves, but the acquirers will likely be other small banks or foreign banks, analysts and bank officials said at the Reuters Banking Summit in New York.
Investors are betting there will be more bank acquisitions after credit card company Capital One Financial Corp. (COF.N: Quote, Profile, Research, Stock Buzz) said it would buy North Fork Bancorp Inc. NFB.N, a New York regional bank, for $14.6 billion on Monday.
Rising interest rates are squeezing profits for all banks, creating an incentive to sell. Smaller banks in particular also face the expense of complying with new governance and internal control regulations.
"It's a very challenging environment. The people on the bottom rungs will probably have to merge," Keefe, Bruyette & Woods Chief Executive John Duffy said at the Summit on Wednesday.
That creates an opportunity for two types of acquirers: other small banks, and overseas banks, said Duffy, whose firm specializes in advising small- and mid-cap banks in mergers.
Small banks are looking to boost their retail branch networks, a crucial source of business for them, and acquisitions can help.
One bank considering acquisitions is Banco Popular, part of Puerto Rico's Popular Inc. (BPOP.O: Quote, Profile, Research, Stock Buzz).
Banco Popular plans to add more than 100 U.S. branches by the end of 2008 in areas such as southern California and New York, Roberto Herencia, president of Banco Popular North America, said at the Summit on Thursday. Continued...
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