Philadelphia banks -- a second-growth forest where the handful of several-billion-dollar banks compete with national giants Wells Fargo, PNC, TD and Citizens -- are worried about a couple of things, writes veteran bank analyst Frank Schiraldi in a report to clients of Sandler O'Neill + Partners:
- Too many apartments are being built for the "frothy" Philadelphia market;
- "Irrational" loan pricing is making it tougher to profit from loans.
He told clients that Philadelphia- and Reading/Allentown-focused Beneficial Bancorp, Bryn Mawr Bank Corp., Customers Bancorp, Tompkins Financial Corp. and Univest Corp. are busy stealing lenders and customers from the bigger banks to win more deals.
Indeed, bank acquisitions by out-of-town companies continue to create a "market disruption" that the surviving local banks call "the gift that keeps on giving," Schiraldi added.
"We got the impression that the shake-up from the increase in southeastern Pennsylvania M&A activity would continue to bear fruit for many years to come." These opportunities for new business are encouraging the independents and making them less likely to sell "on the near-term horizon."
Bank-by-bank, Schiraldi notes:
- Beneficial expects it will be able to cut 45% off the cost of operating the former Conestoga Bank as it closes 5 of Conestoga's 14 branches and consolidates its systems and administration.
Beneficial says the acquisition will help expand its Small Business Administration and leasing businesses. And generally, "organic loan growth has begun to pick up," especially for commercial real estate. The company is hiring more business lenders. It "is ready to pursue another acquisition," but warned "targets" here are getting harder to find. Maybe down the Shore.
Customers Bancorp Inc. boss Jay Sidhu is promoting BankMobile as a replacement for branch banking. Schiraldi called the platform an "undervalued" asset that Customers is likely to spin off as an independent company in an initial public offering (IPO). Bank Mobile is small -- Schiraldi "reserves judgment" on Customers' hope it's worth $100 million to $200 million pending more information on its deposits and proprietary technology.
He also noted Customers relies heavily on commercial real estate loans and said management is "very confident" its small New York apartment-lending portfolio will resist a slowdown in high-end Manhattan apartment