The Year of Record Bank Mergers; Special Report by Leading Financial Web Site Penny Stock Detectives
In a recent Penny Stock Detectives article, editor Danny Esposito points out that after the financial crisis.
"When the financial crisis hit in 2008, banks in general were lumped together as being untrustworthy, as they had toxic mortgage-backed securities on their books that had caused the financial crisis in the first place," observes Esposito.
Although this was true about the big banks, the regional banks avoided mortgage-backed securities completely, according to Esposito. Investors, however, threw all of these bank stocks out the window, selling them all when the financial crisis hit.
The regional banks were responsible, prudent, and had proper assets on their balance sheets to cover their loans, which were provided to support the community they were established in, comments Esposito.
Since the financial crisis, the slow economic-growth environment has meant credit contraction within the U.S. economy in general. Credit contraction results in very low loan growth, as consumers are already strapped with too much debt, and businesses are unwilling to take chances in an economy that features very weak consumer spending.
These smaller regional bank stocks have suffered from indifferent investor sentiment simply because of a lack of business and, thus, very little new loan growth, notes Esposito.
"Since they have solid balance sheets and a solid base within the community they serve, the best way to survive is to merge," he says. "This creates a bigger bank stock with a larger loan portfolio, which will allow the bank to thrive in this difficult economic environment."
In 2011, there were 159 such mergers with the average premium-price paid over and above the current share price--roughly 69%, reports the Penny Stock Detectives editor. With investors having an opportunity to make 69% on their money, the risk-reward is very attractive.
The survival of these regional bank stocks without the help of bailouts from the Federal Reserve proves that their balance sheets are in very good shape. Their only problem is a lack of revenue growth due to the credit contraction in a weak economy, believes Esposito.
"Although the regional bank stocks did nothing wrong, they are still being subjected to regulation that the big banks must comply with in order to avoid another financial crisis. While this is completely unfair to the regional bank stocks, it pushes them into mergers, just to avoid the hassle and more importantly the expense of attempting to meet the regulatory standards forced upon them," argues Esposito.
"For these reasons," he concludes, "the regional bank stocks should continue their merger and acquisition trend in 2012. Investors would do well to find quality regional bank stocks because their upside potential--as evidenced by what occurred in 2011--is huge."
To see the full article and to learn more about Penny Stock Detectives, visit www.pennystockdetectives.com.
The editors of Penny Stock Detectives believe low-priced stocks, when researched properly, present investors with great opportunities to accumulate wealth and to increase the value of their investment portfolios. You can learn more about Penny Stock Detectives at [url=http://www.pennystockdetectives.com.]www.pennystockdetectives.com.
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