Merger Mondays follow Bank Failure Fridays

by Marilou Moursund on September 29, 2009

in Banks,Credit Crisis,FDIC,M & A Activity

The pattern of a flurry of M&A activity on Monday following the announcement of several bank failures on Friday afternoon is continuing.  This is all part of the healing process of balance sheet deleveraging.  The market liked Abbott’s purchase of Solvay, but Xerox dropped 15% on its proposed acquisition of Affiliated Computer Services.

The number of bank failures this year is up to 95, and the FDIC needs to replenish the Deposit Insurance Fund (DIF).  It is at its lowest level since 1993.  Sheila Bair has outlined the possibility of having member banks pre-pay assessments or pay emergency fees, or the FDIC can tap its credit line with the Treasury.   Bank earnings are robust now given their incredibly low cost of funding, but they will continue to be pressured by write-offs and FDIC commitments.  I don’t think that the Fed will raise rates until they have a sense that we are close to the end of Failure Friday.

Leave a Comment

Previous post:

Next post: