Fifth Third agreed to acquire Comerica in an all-stock deal valued at $10.9 billion. As a result, the deal creates the ninth-largest U.S. bank. Moreover, the U.S. bank merger strengthens regional presence and expands access to growing markets.
Dealmakers note that mergers among regional banks are gaining momentum. Therefore, companies aim to diversify revenue and compete with larger rivals. Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors, said the environment makes U.S. bank merger activity attractive for banks of equal size. Additionally, the regional bank index climbed 2.2% in afternoon trading.
Analysts expect this transaction to encourage more combinations. Specifically, banks with assets up to $100 billion may pursue deals. Comerica has long been a potential acquisition target. Meanwhile, PNC recently purchased FirstBank. Furthermore, other banks, including Zions Bancorp, Flagstar, First Horizon, East West, Popular, Western Alliance, and Webster Financial, are also viewed as potential candidates. As a result, speculation about deals has supported their share prices.
Fifth Third’s acquisition of Comerica will expand its footprint across 17 of the 20 fastest-growing U.S. markets. These include Texas, California, and parts of the southeast. Consequently, the combined company will hold $288 billion in assets, $224 billion in deposits, and $174 billion in loans. Analysts at TD Cowen also said Fifth Third will rank among the top five banks in every major Midwest metropolitan area.
The deal provides a path to diversify revenue streams through wealth management, payments, and treasury services. Analysts at Baird stated that the U.S. bank merger accelerates Fifth Third’s expansion. In addition, it leverages Comerica’s consumer banking capabilities. Therefore, the approach reduces reliance on interest income and strengthens long-term growth potential.
Following the merger, Comerica CEO Curt Farmer will serve as vice chair. Meanwhile, Peter Sefzik will lead Fifth Third’s wealth and asset management business. Furthermore, three Comerica board members will join Fifth Third’s board. In total, Fifth Third shareholders will own about 73% of the combined company.
Investment banks advised on the deal. Goldman Sachs worked with Fifth Third, while J.P. Morgan Securities and Keefe, Bruyette & Woods advised Comerica. Therefore, the merger is expected to close by the end of the first quarter of next year.
Record stock prices have also facilitated the U.S. bank merger. Consequently, they provide valuable currency for acquisitions. Analysts say this deal signals more discussions among regional banks. Additionally, companies want to strengthen balance sheets and achieve growth. Overall, the transaction shows how consolidation can drive competitiveness in the U.S. banking sector.
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