U.S. bank M&A slump seen for many more months

By Paritosh Bansal

NEW YORK (Reuters) - The U.S. banking sector will see more consolidation, but any pickup in unassisted deals may not happen before the end of next year, with auctions of failed banks dominating activity in the coming months, bankers said on Tuesday.

New regulations, need for capital, overcapacity in the industry and stronger banks going on the offensive will drive independent mergers eventually, but that would play out over years, not quarters, industry executives and advisors said at the SNL Bank M&A Symposium in New York.

"M&A activity has clearly slowed," KeyCorp Chief Executive Henry Meyer said. "But I think we will see things pick up again, maybe as early as the end of next year. Maybe it will be 2011 and beyond."

For now, though, auctions of failed banks by the Federal Deposit Insurance Corp (FDIC) are likely to dominate M&A activity in the banking industry.

Meyer and two of his fellow panelists, New York Community Bancorp Chief Executive Joseph Ficalora and People's United Bank Chief Executive Philip Sherringham, said they were all eyeing banks in FDIC-run auctions.

"There is still such uncertainty in the marketplace in terms of taking on somebody else's problems," Meyer said. "We are really in a wait-and-see mode."

Many bankers and investors seem to be focused on FDIC deals and don't want to consider unassisted transactions even if the circumstances make sense, said Joseph Moeller, a managing director at Keefe, Bruyette & Woods.

"There seems to be a borderline unhealthy focus on FDIC-assisted deals," said Moeller, who spoke at a separate panel of investment bankers earlier in the day.