Spanish cuisine is often represented by tapas -- those little plates of assorted appetizers. But Spanish banking giant Banco Bilbao Vizcaya Argentaria
Compass operates 417 branches in six states across the Sun Belt, with nearly half of the branches located in the high-growth Texas market. The bank's regional franchise is well-regarded for its efficient operations and high credit quality. In 2006, Compass achieved record earnings of $460.4 million or $3.53 per share and boasted a non-performing loan ratio of just 0.23% on a loan portfolio of $24.3 billion. The company's $34 billion in assets ranks it as the 39th largest U.S. bank.
The acquisition of Compass would fit with BBVA's global competitive strategy, but it also suggests a willingness to take a more aggressive approach to the U.S. market. The bank has a long record of pursuing growth opportunities outside its home market, with special attention to Latin American markets. Its strong presence throughout Latin America includes the Bancomer subsidiary, Mexico's largest bank. BBVA's small U.S. footprint, however, seemed to reflect the limited ambition of complementing that Latin American franchise by providing a channel for Mexicans working in the United States to send their earnings home. Tapping into the market for retail money transfers has been an important business objective for financial services companies as diverse as Western Union
This latest deal shows that BBVA's U.S. ambitions are actually quite expansive. Compass is among the largest banks in Texas, and its full-service banking platform puts it in direct competition with national banks like JPMorgan Chase
It remains unclear whether this transaction will trigger other acquisitions and accelerate the pace of industry consolidation. Compass' takeover price of $71.82 per share is equivalent to 4.6 times tangible book value and represents a premium of 16% over the stock's recent trading range. Recent bank acquisitions commanded more modest multiples of book value, and many analysts had already considered the regional banking group overpriced. With bank profit growth expected to slow this year as a result of deteriorating credit quality and pressure from an inverted yield curve, there is certainly a sound basis for other potential acquirers to proceed cautiously.
Nevertheless, each new acquisition heightens the musical-chairs quality of the consolidating bank industry. In an environment where large-cap banks with growth ambitions may fear losing an important takeover opportunity to a quicker rival, certain regional banks present themselves as appealing candidates for strategic acquisitions. In particular, banks such as Regions Financial
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