Today, John Palmer delves into his extensive career in banking, and highlights the golden opportunity that lies in small and mid-sized banks. He highlights trends like consolidation, regulatory evolution, and technological advancements. Looking ahead, he is optimistic about the banking sector’s recovery cycle and its capacity for sustained growth, even amid challenges like commercial real estate pressures and emerging fintech innovations. Today we discuss...
- John Palmer shared his extensive experience in the banking industry, including his career start at KPMG and his transition to founding a banking-focused investment fund in 1996.
- How the banking industry has undergone massive consolidation since the 1990s driven largely by efficiency and cost-saving opportunities.
- Key trends like stricter regulations, higher capital requirements, improved loan underwriting, and the transformative impact of technology on banking operations.
- The causes of the recent crises at Silicon Valley Bank, Signature Bank, and First Republic, emphasizing asset-liability mismanagement during rapid rate hikes.
- Blockchain technology acknowledged as a potential long-term asset for banks and skepticism about the role of cryptocurrency in traditional banking.
- The current banking stock cycle entering an upward phase, with profitability projected to grow steadily through 2026.
- Bank earnings and stock performance are rising, driven by factors like margin expansion and easing deposit costs.
- Banks with $1-$10 billion in assets are attractive targets for M&A due to cost savings and growth opportunities.
- Major banks are expanding branch networks in rural areas, targeting low-cost deposits, while smaller banks focus more on digital channels.
- The Midwest and Mideast regions show the most M&A activity, though the Southeast and California are also of interest.
- Investments focus on public banks with shareholder lists amenable to proxy support for structural changes.
- Banking regulation relief under a new administration could lower compliance costs and ease capital requirements.
- A normalized yield curve is boosting loan repricing and margins, contributing to earnings growth.
- Bank valuations remain attractive compared to broader markets, with banking stocks trading at significant discounts to earnings.
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Today's Guest: John Palmer
Mr. Palmer is a co-founder of PL Capital, LLC. Prior to co-founding PL Capital in 1996, Mr. Palmer was employed by KPMG LLP, an international public accounting firm, from 1983 to 1996. While at KPMG, Mr. Palmer specialized in assurance and strategic advisory services to companies in the commercial banking, consumer finance, thrift, mortgage banking, and discount brokerage industries. He has extensive experience in merger and acquisition transactions, public and private securities offerings, filings with the Securities and Exchange Commission (SEC), and regulatory issues. In addition, he has advised numerous banking organizations regarding their strategic alternatives, including M&A, mergers of equals, and opportunities to enhance or expand existing lines of business. In 1993, Mr. Palmer became a Director of KPMG Financial Services – Capital Strategies Group, a national corporate finance practice providing financial service companies with merger and acquisition advisory services.
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