17 March 2017

Sterling Bancorp and Astoria Financial join bank merger bandwagon


Sterling Bancorp is buying Astoria Financial in a USD 2,200 million all-scrip takeover that will make the combined entity the sixth largest regional bank in the New York metropolitan area. The announcement came just months after New York Community Bancorp dropped its USD 2,000 million offer to take the target private.

Under the terms of the transaction, Sterling Bancorp will pay USD 21.92 per share, representing an 18.6 per cent premium to Astoria Financial’s close of USD 18.48 on 6th July, the last trading day prior to the announcement. Subject to approvals from shareholders and regulators, the board-recommended bid is scheduled to complete by the end of the year.

The deal, which is Sterling Bancorp’s largest to date, according to Zephyr, the M&A database published by Bureau van Dijk, is expected to save both banks USD 100 million annually and add 9 per cent to their earnings in 2018. Additionally, the amalgamated group will hold USD 19,000 million in deposits and USD 29,000 million in assets following the transaction.

According to Reuters, low interest rates, lacklustre returns on equity and strict regulations prompted a wave of consolidation among US regional banks in 2016. The situation may ease, however, as US President Donald Trump, who wants a less regulated environment for financial institutions, began reviewing the relevant laws last month. Furthermore, the US Federal Reserve this week lifted its benchmark interest rate by a quarter point as the country’s economy continues to improve, with two more rate hikes likely to follow this year.

US banks that merged last year include BB&T and National Penn Bancshares, which successfully went through a USD 1,800 million consolidation in April. This was barely a year after the Winston-Salem-based bank acquired Susquehanna Bancshares for around USD 2,492 million in 2015.

Similarly, United Bankshares last August agreed to take over Cardinal Financial for around USD 912 million as it sought to expand in Washington DC. The deal, which still requires approvals from regulators and shareholders, is due to close in June this year. Adding to the list of US bank integrations in 2016 was Yadkin Financial’s USD 456 million purchase of NewBridge in March.

According to Zephyr, there were in total 2,342 announced or completed transactions targeting commercial banks worldwide last year. The largest of these was China Cinda Asset Management’s HKD 337,009 million (USD 43,404 million) acquisition of Nanyang Commercial Bank in May. Second on the list was National Bank of Abu Dhabi’s AED 54,511 million (USD 14,838 million) bid to buy First Gulf Bank, which is due to take place next month.

© Zephyr