Financial services M&A update: Q4 2017
While the new tax bill and leadership changes within the Consumer Financial Protection Bureau are potential sources of optimism for the financial services industry, business loans experienced the lowest growth since 2011 and a slew of recent natural disasters brought challenges for insurance companies facing a record-high $135 billion payout. 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 positioned to benefit long-term from new tax legislation1: As of January 23, 2018, bank stocks are up 6.5 percent since December 19, 2017, when the Senate approved the sweeping new tax bill. Though the tax cuts are expected to positively impact banks in the long-term, some institutions expect a decrease in earnings for Q4 2017 due to a decreased value for deferred tax assets.
- Business loans experience the lowest growth since 20112: As of December 20, 2017, bank loans to companies were only up 1.1 percent from 2016, yielding an average weekly growth rate of 2.7 percent for 2017. Historical growth rates in 2016 and 2015 were 9.3 percent and 11.6 percent, respectively. Some say that the low business loan growth rate may be returning to a normal level, while others say there is “pent-up demand” from borrowers who have been waiting to borrow.
- New chief appointed to the Consumer Financial Protection Bureau3: Regulatory relief appears to be continuing in the wake of Richard Cordray’s departure from the Consumer Financial Protection Bureau. President Trump’s new appointee, Mick Mulvaney, may limit the agency’s scope and has announced he will not request additional funding for 2Q18.
- Insurance industry reels from natural disasters4,5: In a year already wrought with damages from three hurricanes and two earthquakes, California suffered its largest and most destructive fires in recent history. The fires created insured losses of roughly $8 billion, bringing the total insured losses for the year to a record-high $135 billion payout from insurers.
This newsletter is a periodic compilation of certain capital markets information. Information contained in this newsletter should not be construed as a recommendation to sell or a recommendation to buy any security. Any reference to or omission of any reference to any company in this newsletter shall not be construed as a recommendation to sell, buy or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. This newsletter is published solely for the general information of clients and friends of Deloitte Corporate Finance LLC. It does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Certain transactions, including those involving early stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known risks, uncertainties and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this newsletter. We and our affiliates and related entities, partners, principals, directors, and employees, including persons involved in the preparation or issuance of this newsletter, may from time to time have “long” and “short” positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein. The companies mentioned in this newsletter may be: (i) investment banking clients of Deloitte Corporate Finance LLC; or (ii) clients of Deloitte Financial Advisory Services LLP and its related entities. The decision to include any company for mention or discussion in this newsletter is wholly unrelated to any audit or other services that Deloitte Corporate Finance LLC may provide or to any audit services or any services that any of its affiliates or related entities may provide to such company. No part of this newsletter may be copied or duplicated in any form by any means, or redistributed without the prior written consent of Deloitte Corporate Finance LLC.
1 "America’s bank profits take a hit from tax reform,” The Economist. January 4, 2018.
2 Ensign, Rachel Louise. “Business-Loan Growth Fell Off a Cliff in 2017 and No One Can Figure Out Why,” WSJ. January 2, 2018.
3 Puzzanghera, Jim. “Trump Names Mulvaney as Acting Chief of Consumer Bureau as Richard Cordray Departs,” Los Angeles Times. November 24, 2017.
4,5 Tierney, Lauren. “The grim scope of 2017’s California wildfire season is now clear. The danger’s not over,” The Washington Post. January 4, 2018.