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Aug 28 Could the advancing age of some small bank CEOs pave the way for more consolidation in the fragmented U.S. market?
A Barclays Capital analyst sees the age of the boss of Hudson City Bancorp Inc as a factor in its $3.7 billion sale to M&T Bank Corp this week and has listed seven other banks with older CEOs.
"In (Hudson City Bancorp's) case we believe CEO age and interest rate risk were factors," Jason Goldberg said in a note to clients.
Goldberg, who declined to talk about the likelihood of takeovers for these banks, said he expected consolidation in the sector to continue.
He listed seven banks including Wayne, New Jersey-based Valley National Bancorp, Tupelo, Mississippi-based Bancorpsouth Inc, Wayzata, Minnesota-based TCF Financial Corp and San Antonio, Texas-based Cullen Frost Bankers Inc that have CEOs who are 65 and older.
The others are Dallas-based Texas Capital Bancshares Inc , San Francisco-based First Republic Bank and Miami Lakes, Florida-based BankUnited Inc.
Goldberg is rated five stars for his coverage of U.S. banks, according to Thomson Reuters StarMine data.
M&T Bank Corp on Monday struck a $3.7 billion deal to buy the 129-year-old Hudson City, which has been walloped by falling rates.
Hudson City's 64-year-old CEO Ronald Hermance, who took over the company's reins a decade ago, went on leave in February to receive a bone marrow transplant to treat a low blood cell count. He returned from medical leave to work on the deal.
"The deal was a combination of factors and Hermance's age was also certainly one of them," said Gerard Cassidy, a bank equity analyst at RBC Capital Markets.
Wunderlich Securities analyst Kevin Reynolds said a CEO's age can be a factor in determining whether or not a company should sell itself.
"If you have a small bank, with a CEO say 63 years old and you are looking at a slow growth economy to continue for at least the next two years. He is going to be at retirement age before it gets any better and, in fact, it probably gets worse," analyst Reynolds said.
The trend may not be restricted to banks. In a study last year, the National Bureau of Economic Research, a private nonprofit research organization, said the likelihood of a company receiving a takeover bid increases sharply when target CEOs reach age 65.
Shares of the banks listed by Goldberg were slightly up in mid-day trade on Tuesday.