Last night it was reported that M&T Bank (tkr: MTB) would acquire People’s United (tkr: PBCT) for more than $7 billion. These “scale” acquisitions between regional banks simply delay the inevitable. What is required is the hard work of evolving business models and service delivery capabilities. More of the same won’t suffice.
Regional banks are getting squeezed. The pressure is coming from multiple directions including the following:
- Traditional banking giants: Banking behemoths such as JPMorgan Chase (tkr: JPM) can offer low prices across various commodity services which are subsidized by profits generated elsewhere (futures market for example).
- Large platform companies: Technology giants such as Apple (tkr: AAPL) with its Apple Pay and Apple Card offerings and Google (tkr: GOOGL) with its G-Pay wallet are disrupting financial services. Platform companies have the duel threat of their current offerings augmented by the threat of what may come should they point their massive balance sheets at the Financial Services industry.
- Fintech companies are disrupting the status quo: Stripe (private), PayPal (tkr: PYPL) and Square (tkr: SQ) on the Payments side and upstarts such as Robinhood, eToro and Webull on the Trading side are each successfully competing for customer wallet share (i.e. deposits).