MW These banks might be next to pair up, says analyst who called the $11 billion Comerica sale

By Steve Gelsi and Philip van Doorn

Jefferies analyst David Chiaverini highlights five possible deals that would lead to the highest increases in profit for the players

Some regional banks are struggling to improve profitability. Mergers can help them to achieve economies of scale.

The Jefferies analyst who flagged the potential acquisition of Comerica Inc. by Fifth Third Bancorp has laid out the merger candidates that may be next.

Analyst David Chiaverini highlighted five deals, out of 20 potential bank tie-ups that he studied, as regional financial firms look to pair up to better compete with larger rivals.

The most accretive transactions - the ones he believes offer the most earnings-growth potential - include these five:

-- Valley National Bancorp VLY of New York City buying Flagstar Financial Inc. FLG of Hicksvile, N.Y., which would offer a potential 21% boost to earnings per share.

-- SouthState Bank Corp. SSB of Winter Haven, Fla., buying BankUnited Inc. BKU of Miami Lakes (17% accretive).

-- CVB Financial Corp. CVBF of Ontario, Calif., buying First Foundation Inc. FFWM of Irvine, Calif. (15% accretive).

-- PNC Financial Services Group Inc. PNC of Pittsburgh purchasing Citizens Financial Group Inc. CFG of Providence, R.I. (13% accretive). This would be a very large deal, as PNC is the ninth-largest U.S. bank, with $559 billion in total assets as of June 30, while Citizens ranks 15th, with $218 billion in total assets.

-- KeyCorp KEY of Cleveland buying Valley National (12% accretive). KeyCorp was the 20th largest U.S. bank, with $185 billion in assets as of June 30, while Valley had $53 billion in assets.

Chiaverini put out the list in August, when he upgraded Comerica to hold from underperform because it was "more open" to a merger deal.

The $11 billion deal for Fifth Third $(FITB)$ of Cincinnati to acquire Comerica $(CMA)$ of Dallas was announced on Monday. This was among the 20 potential merger scenarios Chiaverini had listed, but it wasn't one of the deals he highlighted as offering the greatest potential to boost earnings. Under that metric, he concluded that the acquisition of Comerica by another buyer, Huntington Bancshares $(HBAN)$ of Columbus, Ohio, would have provided a potential earnings boost of 8%.

Read: Fifth Third paying nearly $11 billion for Comerica as wave of bank mergers builds

On Tuesday, Chiaverini reiterated the same list, with no changes, as a merger wave among banks continues to build.

"Sub-scale banks are under pressure from rising tech and branch costs, and M&A [mergers and acquisitions] offers a path to increased scale and efficiency," he wrote in a note to clients. "We believe mergers offer a path to scale operations and enable banks to become more efficient."

The most capable buyers, according to the analyst, include First Citizens Bancshares Inc. $(FCNCA)$, PNC, Fifth Third and M&T Bank Corp. $(MTB)$ of Buffalo, N.Y.

Likely sellers along with Comerica include Los Angeles-based Banc of California Inc. $(BANC)$ and First Foundation (FFWM), which are among the institutions currently "facing profitability headwinds" or trading below their tangible book value, according to Chiaverini.

Screening regional banks for underperformance

Separately, a MarketWatch screen of the top 50 publicly traded U.S. banks by total assets revealed some underperforming names that could be ripe for deals to boost their performance or be merged with competitors.

We started paring the list by excluding the six largest U.S. banks - JPMorgan Chase & Co. $(JPM)$, Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo & Co. $(WFC)$, Goldman Sachs Group Inc. $(GS)$ and Morgan Stanley $(MS)$.

Then we removed three banks focused on securities custody and asset management: State Street Corp. $(STT)$ of Boston, Bank of New York Mellon Corp. $(BK)$ and Northern Trust Corp. $(NTRS)$ of Chicago.

We sorted the remaining list by average return on equity for five full years through 2024. There are several ways to calculate banks' returns on equity, including return on tangible common equity, which excludes preferred shares and intangible assets, such as deferred tax assets and loan-servicing rights, from the denominator. We opted to use the most simple, standard ROE calculation.

Here are the 15 remaining U.S. banks among the largest 50 by total assets, showing the lowest five-year ROE through 2024:

   Bank                               Ticker City                  Five-year average ROE  Total assets ($bil) 
   Flagstar Financial Inc.           FLG     Hicksville, N.Y.                      1.91%                  $92 
   Truist Financial Corp.            TFC     Charlotte, N.C.                       4.54%                 $544 
   Cadence Bank                      CADE    Tupelo, Miss.                         6.46%                  $50 
   Associated Banc-Corp.             ASB     Green Bay, Wis.                       6.50%                  $44 
   Citizens Financial Group Inc.     CFG     Providence, R.I.                      7.30%                 $218 
   Prosperity Bancshares Inc.        PB      Houston                               7.54%                  $38 
   F.N.B. Corp.                      FNB     Pittsburgh                            7.55%                  $50 
   Atlantic Union Bankshares Corp.   AUB     Glen Allen, Va.                       8.11%                  $37 
   KeyCorp                           KEY     Cleveland                             8.12%                 $185 
   Valley National Bancorp           VLY     New York City                         8.28%                  $63 
   SouthState Bank Corp.             SSB     Winter Haven, Fla.                    8.45%                  $66 
   Pinnacle Financial Partners Inc.  PNFP    Nashville, Tenn.                      8.96%                  $55 
   BankUnited Inc.                   BKU     Miami Lakes, Fla.                     9.12%                  $35 
   Huntington Bancshares Inc.        HBAN    Columbus, Ohio                        9.43%                 $208 
   Old National Bancorp              ONB     Evansville, Ind.                      9.50%                  $71 
                                                                                              Source: FactSet 

Click on the tickers for more about each stock.

Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page

Merger activity dollar volume among U.S. banks reached a four-year high during the third quarter, with $16.63 billion in deals announced, according to S&P Global Market Intelligence data, led by the $8 billion deal to purchase Synovus Financial Corp. $(SNV)$ of Columbus, Ga., by Pinnacle Financial Partners (PNFP) of Nashville, Tenn., announced in July.

That's the highest total for a quarter since the fourth quarter of 2021, which had $25.3 billion in deals.

Other M&A deals announced during the third quarter included the $4 billion purchase of FirstBank Holding Co. of Lakewood Colo., by PNC and the $1.9 billion purchase of Veritex Holdings Inc. $(VBTX)$ of Dallas by Huntington Bancshares.

-Steve Gelsi -Philip van Doorn

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October 07, 2025 13:24 ET (17:24 GMT)

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