To The Moon

🇺🇸 regulators surprised bankers & investors by allowing the largest 🇺🇸 lender to buy another bank & become even bigger. $JPMorgan Chase(JPM)$  however beat the odds, clinching a deal to buy $First Republic Bank(FRC)$  on 1/5 (Mon). JPM gained over 2% & trading for FRC was halted during pre-market & is expected to be delisted.

As per my previous post alert, 🇺🇸 trading on 1/5 was volatile & 🐻-ish sentiments pushed throughdue to FRC’s collapse. Some Big 🏦🏦 like $Bank of America(BAC)$  $UBS Group AG(UBS)$ were down & most Regional🏦🏦🏦 were down $Western Alliance(WAL)$ as can been seen from

$SPDR S&P Regional Banking ETF(KRE)$ 

Why I’m Avoiding Regional🏦🏦🏦❓

🕵🏻‍♀️Main Reason ➡️ 🔥🔥More Trouble Is Expected For Regional🏦🏦🏦‼️

🚨 JPM CEO Jamie Dimon expects more deals will follow in the industry ➡️ “Banks will consolidate,” Dimon told analysts on a conference call on Monday hours after winning a government auction for FRC, which was seized overnight by regulators.

⚠️ The approval of the JPMorgan deal-which 2 months ago would have seemed unthinkable given the “too big to fail” stigma of 2008- could signal a potential shift in stance from regulators as 🏦🏦🏦 face more stress in a worsening economy.

⚠️ Large regional banks could merge with each other to better compete with banking giants, while small & mid-size lenders could also be taken over as their customers flee to larger institutions.

🚨 Dimon is not alone. Several analysts, industry executives & investors said they believe the March banking crisis has set conditions for a long-predicted round of industry consolidation to finally happen. The reasons are many, they said.

🐻 Lenders that have a high proportion of deposits that are not covered by federal deposit insurance (FDIC) are under pressure amid a flight to safety & may need to raise capital.

🐻 More costly regulations are likely to follow in the wake of the crisis, which could further erode banks’ bottom lines & force them in the arms of a suitor.

🐻🐻 And as a recession looms & economic activity slumps, rising defaults in the commercial real estate market & shrinking profits may also spur tie-ups.

➡️ “There are a lot of signs pointing to the fact that the consolidation period has just begun,” said Dan Goerlich, a partner at PwC who focuses on 🇺🇸 financial deals.

🐻🐻🐻 The 🇺🇸 currently has more than 4,700 banks, government data showed. Only half of those will survive the next decade, predicted Greg Hertrich, head of 🐻 depository strategies at Nomura🚨🚨🚨

➡️ This is similar to what happened after the 2008 financial crisis.

➡️ From 2007 through 2013, the number of independent commercial banks operating in the 🇺🇸 shrank by 14%, or 800 institutions, government data showed.

➡️ “I’m already having knocks on my door,” …”A lot of the regional or smaller banks are looking at being acquired. We’ve also been approached by some big bulge bracket banks that are also looking to acquire the regional banks.” said Mona Dajani, a partner at law firm Shearman & Sterling LLP.

⚠️ Monday’s deal shows larger banks with deeper pockets are better placed than mid-sized lenders, according to Jefferies analysts.

“This may have precluded other regional bank bidders from making the math work as well as it does for JPM,” they wrote.

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