Last year, the big trend among banks was growth through acquisition, with banks like M&T Bank and FirstMerit getting in on the action. These acquisitions were strategic, expanding geographic reach for the banks and increasing deposits, which in turn helped to strengthen the banks' balance sheets.
This acquisition trend continues this year, and now banks can apparently see their share price jump just by announcing that they might consider selling themselves as a means to "increase shareholder value." Not actually announcing even a preliminary sale, mind you, but just that a sale could be a possibility.
This was the case this morning with Virginia Commerce Bancorp , a bank with 28 branches around Washington, DC and $3 billion in assets. The bank could be an attractive acquisition target, especially since it recently repaid over $70 million in TARP funds that it received in December 2008. Banks that do this tend to perform well in future quarters, and failing to do the same also negative impacts performance, as is the case with Synovus Financial , which still owes over $1 billion to the federal government.
What does it mean
Current investors in Virginia Commerce should be jumping for joy today, but the presence of news like this doesn't automatically make the bank a great buy. The decision makers at the bank could still decide to go in a different direction, or the bank may not get an offer that the board deems worthy. Investors on the sidelines with their eye on this stock jump should dive in to research Virginia Commerce before chasing the gains. But as far as the banking M&A trend in general, I think this is something we'll see plenty more of in 2013.
Looking for another option in banks with whispers about acquisitions? Huntington Bancshares was rumored to be in on the FirstMerit acquisition before things didn't go their way, and are still a compelling option when it comes to regional banks. To help figure out whether Huntington Bancshares is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!
The article Small Bank Jumps for Exploring Sale originally appeared on Fool.com.
Robert Eberhard has no position in any stocks mentioned. The Motley Fool owns shares of FirstMerit and Huntington Bancshares. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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