For the thousands of former BankBoston customers in Rhode Island trying to adjust to Sovereign Bank’s menu of accounts and fees this month, the suggestion that they might be handed off to another bank in a couple of years probably isn’t a welcome one. But, in today’s ever-consolidating banking industry, it’s always possible that a larger bank could snap up Sovereign.
Observers don’t expect that to happen soon, though. Unless, that is, Sovereign botches the integration of the former BankBoston and Fleet branches in New England.
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…the uncovering and balancing act on Reservoir Avenue in Cranston.
The Pennsylvania-based thrift bought 268 Fleet and BankBoston branches in Rhode Island, Massachusetts and Connecticut for $1.44 billion. Regulators required Fleet and BankBoston to divest the branches–and the customers that go with them–before approving their merger.
Sovereign now stretches from Delaware to Massachusetts. Does that make it an attractive acquisition target for merger-happy national banks?
“I wouldn’t exclude it from the realm of possibility,” said James Ackor, who tracks Sovereign as an analyst in the Atlanta office of investment management firm Tucker Anthony Cleary Gull.
But Ackor said it’s more likely that Sovereign would continue as an independent bank if it can successfully integrate the Fleet and BankBoston branches into its operations. The branches are a large bite for Sovereign to swallow. The deal doubled Sovereign’s deposits to $24 billion and boosted its loan portfolio by more than 60 percent to $20 billion.
“If they are able to integrate effectively, I would argue that they have a great opportunity presented them as a result of this acquisition,” Ackor observed. “I feel they’ll make every effort to take advantage of that rather than trying to sell the bank.”
Other bank analysts agreed.
Myong Lee, who follows Sovereign for Emerald Research in Lancaster, Pa., said the bank isn’t a good acquisition target in the immediate future because of the risk that the integration of the Fleet and BankBoston branches may not go smoothly.
“I think a few years down the road, once they have a chance to integrate everything, it would be a very attractive takeover candidate because of the size and the location,” Lee said. “If you have somebody looking to enter the Northeast market, they would be attractive, but it’s not something that I suspect is going to happen anytime soon.”
Ackor isn’t expecting Sovereign to sell out anytime soon either, but, given the pace of bank mergers in recent years, he’s not ruling out a quick sale to another bank.
“If somebody were to come to me and say, ‘Sovereign, 12 months from now, will have sold out to a large commercial bank looking for an enhanced presence in the mid-Atlantic and initial entrance into the New England market,’ that wouldn’t be a stunning revelation,” Ackor said.
