Fifth Third Targets Top 10 Bank Ranking with Comerica Takeover

A couple of regional banks are teaming up to break into the Top 10 list of the biggest banks in America, continuing a trend of upward mobility in the industry. 

Fifth Third said Monday that it struck a $10.9 billion, all-stock deal to acquire Comerica, a buyout that would create the country’s ninth-largest bank with roughly $288 billion in assets.

A Surging of Merging

Back in the late winter of 2023, a chill struck banking M&A. The third- and fourth-largest bank failures in US history, of Silicon Valley Bank and Signature Bank, happened that March. SVB’s collapse also triggered a bank run that prompted the collapse of First Republic, which would become the second-largest bank failure in US history two months later.

The long lull in regional banking consolidation since then appears to be ending. Part of that can be attributed to the Trump administration’s pledge to take a lighter regulatory approach, including a commitment to quicker antitrust approvals. Last month, PNC announced a $4.1 billion cash-and-stock agreement to buy FirstBank, just days after Columbia Banking System completed a $2.4 billion acquisition of Pacific Premier. The spate of regional bank mergers is aimed at boosting competitiveness against the likes of Bank of America, JPMorgan Chase and Wells Fargo, which dominate US lending. That brings us to Comerica, which, as it happens, came under significant stress during the 2023 regional bank crisis, largely due to concerns from ratings firms about its risk of deposit flight. Activist investor HoldCo has been pressuring the bank since July to sell itself to a bigger lender, citing underperformance of its shares compared with peers. On Monday, one suitor capitalized:

• Cincinnati-based Fifth Third has been making a concerted effort to expand beyond its Midwest base into the Southeast, where major metro areas like Atlanta, Dallas and Houston are among the fastest-growing in the country. Acquiring Dallas-based Comerica gives it an immediate foothold and accelerates its plan to have half of Fifth Third branches located in the Southeast by 2030.
• In exchange, Comerica shareholders will receive 1.8 Fifth Third shares for every share they own, worth roughly $82.88 per share or a 20% premium to Comerica’s 10-day volume-weighted average stock price. Fifth Third shares fell 1.4% Monday, while Comerica shares rose 13.7%.

Who’s Next? “Look out for the next 12 months: We should see a lot more mergers,” celebrated Wells Fargo analyst Mike Mayo said on CNBC Monday. His team views several mid-sized lenders, including Banc of California, BankUnited and First Horizon, as potential takeover targets as banks seek to expand. The KBW Nasdaq Regional Banking index rose 1.2% Monday.