Wells Fargo and Citigroup can now buy a big regional bank. Regulators changed their minds about megadeals. Five regional banks apparently fit the bill, which means five regional banks are about to get acquired whether they like it or not.
Wells Fargo opened millions of fake accounts for customers who never asked for them. Citigroup accidentally wired $900 million to the wrong people and had to sue to get it back. These are the institutions regulators decided deserve more assets under management.
The article names five regionals that "make sense as targets." Make sense to whom exactly. Not to the customers who will soon discover their local branch is now a Wells Fargo with a 45-minute wait time and a banker named Trevor who keeps asking if they want to open a credit card. Not to the employees who will get fired in the efficiency synergies. Definitely makes sense to the investment bankers who will collect fees on the deals though.
Retail traders saw this headline and immediately started buying calls on regional bank stocks. They think acquisition premium means free money. They have not considered that Wells Fargo's acquisition premium is getting folded into an organization that treats compliance like a suggestion and customer service like a war crime.
The regulators opened the door to megadeals. That door was closed for a reason. The reason was 2008. Apparently we have decided that was long enough ago that we can try the too-big-to-fail experiment again. This time will be different because the banks pinky promised to behave.
Five unnamed regional banks are about to become subsidiaries of institutions that have racked up more regulatory fines than some countries have GDP, and the financial press is calling it opportunity.
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