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Will Stress Tests Lead To M&A?
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Some market watchers are speculating that the stress test results could trigger a string of mergers.
They believe regulators may try to force deals if a merger could offer significant savings to the government and quickly remove one of the more troubled firms from its ranks.
In fact, “if as a result of the stress test they realize there are two categories of banks – banks with excess capital that are in great shape and banks are are deficient, then (a) marriage may make a lot of sense from a regulatory standpoint,” explains Joseph Vitale, of the law firm Schulte Roth & Zabel.
According to Reuters, the list of likely acquirers could include US Bancorp [USB
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And targets could include Sun Trust [STI
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], KeyCorp [KEY
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"I expect to see a meaningful amount of M&A," muses Fast Money's Karen Finerman, the presdient of Metropolitan Capital. "Last time in 1990-91 when we had a similar crisis in the S&L, we saw a ton of M&A."
However, that’s not to say a shot gun marriage is a done deal. Certainly there will be scrutiny, especially after allegations that the last administration forced Bank of America to complete its acquisition of Merrill Lynch.
And regulators may not want to create another giant through a merger.
“You would only want to put together a strong organization and a weaker one if you thought that you could restructure it and emerge with a strong single entity,”explains Jonathan Weld of Shearman & Sterling.
"(But) you don't want to put two stones together and see if they float."
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Trader disclosure: On May 7th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AAPL), (BAC), (F), (TX); Seygem Asset Management Is Short (DVN); Finerman's Firm Owns (CSCO); Finerman's Firm And Finerman Own (BAC) Preferred Shares And Are Short (BAC); Finerman's Firm Owns (C) Preferred Shares And Is Short (C); Finerman's Firm Owns (MSFT) And Owns (MSFT) Put Spreads; Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Is Short (IJR),(MDY) (SPY), (IWM), (USO), (BBT)
Terranova Owns (GENZ), (ABT), (XBI); Terranova Is Long (DIS) Call Spreads; Terranova Is Short June Crude Oil; Terranova Is Short (JPM), (WYNN), (X), (MS), (JOYG), (HES), (BRCM), (POT); Terranova Is Short (IBM) Call; Terranova Is Short (XOM) Call Spreads
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV); Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (CAL), (DLR), (EPR), (EXR), (IGE), (MEE), (DBC), (DBV), (DBA), (SKT), (UA), (CLB), (WBMD): Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co: Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
CNBC.com with Reuters
Data is a real-time snapshot *Data is delayed at least 15 minutes
