Analysis

Financial Services M&A update: Q1 2017

With a decrease in bank loan growth, rising interest rates are starting to provide banks with hope. This Financial Services M&A update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the Financial Services industry.

Financial Services trends

  • Banks experience slowed loan growth1: Banks saw lower levels of growth in loans over the previous year in Q1. Strong investment banking practices at banks like J.P. Morgan and Citigroup helped to mitigate the slowdown, but many banks were heavily affected.
  • Bank stocks remain strong2: The SNL Bank Index remains high–ending the quarter at 25.7 percent above its pre-election level. The index reached prices as high as 33.8 percent above its pre-election price during Q1, signaling continued hope for banks as a result of the Trump Administration’s promise of regulatory reform.
  • Consumer debt on the rise3: While total loan growth has stalled, consumer lending has been on the rise in recent years. In February, credit card debt reached its highest level since January 2009, according to the Wall Street Journal. Additionally, credit card charge-off rates are up YoY from Q1 2016, which could signal trouble for banks and lower retail spending to come.
  • Rising interest rates give hope to banks4: The Federal Reserve raised interest rates in March and may do so two more times during 2017. Rising interest rates will help boost banks’ earnings per share, by up to 3.0 percent per rate increase, according to Goldman Sachs analysts.

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References

1 “Loan-Growth Slowdown Hurts Some Banks More than Others,” The Wall Street Journal.April 13, 2017.
2 SNL Financial. Accessed April 28,2017. Data as of March 31,2017.
3 “The Risk of Rising Consumer Borrowing,” The Wall Street Journal.April 17, 2017.
4 “Bank Stocks Pause After Postelection Surge,” The Wall Street Journal. March 31, 2017.

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