BankUnited CEO John Kanas is standing by his prediction that a thousand banks will fail in the next year or two, he told CNBC on Wednesday.
“There is an overcapacity in the banking industry and that will be taken care of,” he said. “We lost 140, 150 last year; we’re on track to lose a similar amount this year. We lost 25 or 30 the year before.”
Kanas, whose private equity firm boughtBankUnited of Florida in May 2009 made the same forecast back in August. Just last month, 15 banks went under in the United States.
The bigger issue, however, is consolidation after the failures subside.
“For the thousand or so that I think will fail over the cycle, there’s another two or three thousand bankers that aren’t having much fun in this market,” he said. “We’ll start seeing real activity in traditional M&A probably starting now and heating up later this year and into next year.”
This comes at a time when the U.S. federal government holds some 95 percent of the residential lending market combined with Fannie Mae and Freddie Mac , he said, which makes it difficult for banks to compete in the mortgage lending space.
“The federal government is the largest bank in the world today, and it does most of the residential lending in the United States,” he said. “It’s a tough time to be a banker. We’re seeing the industry squeezed in.”
Over the last decade, there has been a narrow space for regional and community banks. The lack of credit-worthy borrowers has only exacerbated that problem, he said.
“Most banks today are suffering from too many liabilities and not enough opportunities to buy assets, and not enough lending opportunities,” he said. “Banks need to lend money to make money. And I think that’s going to be the problem for the foreseeable future.”