Financial Regulatory Roll-back Expected-U.S. Community Bank Consolidation to Continue

MCLEAN, Va., May 4, 2018 /PRNewswire/ -- Congress is expected to pass a major piece of legislation on financial regulatory reform as early as this month, that should positively impact U.S. community and regional banks, and further spur industry mergers and acquisitions, according to McLean, VA-based investment manager, FJ Capital Management.

In a white paper released today on the regulatory landscape and structural bank consolidation trend, FJ Capital, an SEC-registered investment advisory firm founded in 2007 that manages approximately $950 million in net assets, maintains that while this bill has been tailored to accommodate both parties in Congress, it holds key provisions that stands to significantly benefit the banking industry.  "Should the bill get enacted, this piece of legislation will represent a major victory for the Administration and the banking industry." 

The paper, "Benefits of Regulatory Roll-back on Community Banks and Structural Industry Consolidation Trend," assesses key provisions of the Senate bipartisan regulatory reform bill vis-à-vis banks' profitability and merger capabilities.  It explores the impact of each of the relevant components of the bill on community banks' compliance, legal and capital costs, improved lending capacity and liquidity. 

Among the key provisions, higher regulatory asset thresholds should kickstart the watershed reform of financial regulation in a significant way for the industry and the consolidation landscape.  The paper emphasizes how the current regulatory hegemony has impeded and even penalized growth.  Importantly, a key benefit of the bill will come not only from relief from explicit regulatory costs, but also through growth as firms no longer will be forced to manage below the existing regulatory thresholds, freeing them to engage in further M&A. 

The outlook for the continued M&A boom is largely based on the belief the elimination of banks' main regulatory hurdle to growth, combined with more manageable compliance costs, will result in increased profitability.  As valuations and buyers' stocks rise, many bank management teams will be hard-pressed to rebuff compelling offers and remain independent.  FJ believes the number of banks likely will decline by more than 50% over the next 10 to 15 years. 

"We are excited about the recent spate of regulatory relief and the impact they will have on both profitability and the ongoing structural bank consolidation trend.  We should continue to witness a shift in the regulatory pendulum toward a more pro-business environment that will be positive for banks and the overall economy."

FJ Capital Management is an investment management firm that analyzes and invests in community and regional banks through alternative strategies.  The firm utilizes its extensive research background and a fundamental approach to assess and identify opportunities in the evolving banking industry.  For additional information on the white paper or to further explore opportunities in the bank sector, please use the below contact information or visit www.fjcapital.com.

To access the white paper, click on the following link:
https://docs.wixstatic.com/ugd/9e6794_e9cdd7ecf36342fcaa6bbf36051212ea.pdf

CONTACT: Andrew Jose, Co-Founder and Managing Partner, FJ Capital Management, [email protected], www.fjcapital.com, +1-703-875-8378  

SOURCE FJ Capital Management

Related Links

http://www.fjcapital.com