Circular pile of cut up assorted bank credit cards

Analysis

Financial services M&A update: Q1 2018

Although we have seen shifting philosophy at the Consumer Financial Protection Bureau (CFPB) and US Senate action to weaken the Dodd-Frank Act, the US bank stock prices continue to see strong performance. However, consumer and industrial loan growth has slowed considerably. 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

  • US bank stock prices continue to perform well1: In the wake of the US presidential election, bank stock prices have increased 40 percent since November 8, 2016. This increase can be partially attributed to anticipated regulatory rollbacks regarding the financial industry as well as recent tax reform, which has now passed.
  • Shifting philosophy at the CFPB2: Following the departure of director Richard Cordray from the Consumer Financial Protection Bureau in November 2017, acting director Mick Mulvaney has outlined a vision for the government agency in which it acts with restraint and does not target companies without substantial evidence of wrongdoing. In February 2018, Mulvaney further updated priorities to address outdated regulations.
  • US Senate advances plan to weaken Dodd-Frank Act3: A plan to scale back the Dodd-Frank Act, a post-financial-crisis banking ruleset, passed a vote by the Senate on March 6, 2018. If passed into law, the bill would exempt approximately two-dozen financial companies with assets between $50 billion-$250 billion from classification as systematically important financial institutions in the eyes of the federal government.
  • Slowing consumer and industrial loan growth4: While recent increases in rates for short-term loans have made floating-rate commercial loans more lucrative, banks are not making many more loans. Data from December 2017 shows that commercial loan growth was reported at 1.6 percent in Q4 2017, well below the quarterly average of 7.2 percent, measured since Q1 2013.

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References

1 Capital IQ. Accessed April 9, 2018.

2 Rappeport, Alan. “Mick Mulvaney calls for ‘Humility’ from Consumer Financial Protection Bureau,” The New York Times. January 23, 2018. https://www.nytimes.com/2018/01/23/us/politics/mick-mulvaney-consumer-financial-protection-bureau.html, accessed April 9, 2018.

3 Erica Werner and Renae Merle. “Senate advances plan to weaken Dodd-Frank Banking Rules on bipartisan vote,” The Washington Post. March 6, 2018. https://www.washingtonpost.com/business/economy/senate-advances-plan-to-weaken-dodd-frank-banking-rules/2018/03/06/286dbce8-215a-11e8-badd-7c9f29a55815_story.html?utm_term=.086a57d0405b, accessed April 9, 2018.

4 The Federal Reserve Bank of St. Louis, “Commercial and industrial loans, all commercial banks,” FRED Economic Research. https://fred.stlouisfed.org/series/CILACBQ158SBOG, accessed April 9, 2018.

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