For today's Friday Addition Edition, I am going to stay with the banks. I got a copy of the full KBW Bank M&A report, and I want to share the information and ideas with you. KBW is one of the best banks and financial stock research forms in existence, in my opinion, so it's worth paying attention when they write on banks and the potential for M&A in the industry.
First, however, we have to take a quick victory lap. One of our first Friday Addition Edition stole some ideas from Bulldog investors, including a SPAC trading slightly below liquidation value. That SPAC has flow higher by about 80% since then as rumors about potential deals flew around the markets.
Keep in mind that this type of volatility can flow both ways. If you own Churchill IV, you might want to consider using a trailing stop going forward to protect your gains from a drop if no deal gets announced.
Of course, you could just sell and take the gains as well. 80% in a couple of months is not normal.
On to bank M&A. The KBW analysts acknowledge that bank M&A has been depressed by the pandemic over the last year. We have seen some Mergers of equals, but not much buying to grow activity has occurred in the last year. That should change in 2021, with boom times returning. Activity is expected to be hottest in the Southeast and Southwestern regions of the United States.
KBW notes that low rates mean low Net Interest Margin, which will pressure the bottom line at smaller banks. While we have seen some steepening and some observers think we may see more, it's not enough to drive massive gains in bottom line profits.
Cost savings is going to be an important way ...