As banks battle for deposits, United Bankshares announced its $267 million acquisition of Piedmont Bancorp, thereby creating the 39th largest banking company in the U.S. based on market capitalization. The all-stock deal represents United’s 34th acquisition and continues a wave of consolidation in the sector.
“The combined organization will have more than $32 billion in assets and a network of over 240 locations across eight states and Washington, D.C., in some of the most desirable banking markets in the nation,” according to the deal’s press release. “Piedmont, headquartered in Peachtree Corners, Ga., has assets of approximately $2.1 billion and 16 locations.”
This focus on acquiring assets is of no surprise. U.S. banks are in the middle of what analysts describe as a “knife fight” for deposits.
As reported in this column, the Federal Reserve’s aggressive rate hikes of 2022-2023 (aimed at fighting inflation) made cash more expensive. This placed pressure on banks as they needed liquidity to pay their depositors higher rates. During the banking bedlam of 2023, Silicon Valley sold their Treasury Bonds, which had been locked in at lower rates, as it sought to free up cash; however, this lead depositors to worry about its solvency, resulting in bank runs – and the bank’s ultimate demise. The contagion spread over the course of the spring to also-vulnerable Signature Bank and First Republic Bank. While the domino of failures stopped there and the sector has stabilized, pressure on banks persists.
Analysts report that banks continue to face a “challenging operating environment, where higher rates have challenged banks’ deposits, margins, liquidity and have raised concerns about their credit quality.” Wary of a repeat of the 2023 crisis, regulators demand banks show they have diverse contingent liquidity options, which includes deposits from different regions and customer types. This has contributed to further consolidation in the industry, including United Bankshares’s voracious appetite.
While banks are attempting to lure in deposits, Americans’ savings rates have plummeted, thereby making that cash relatively more scarce. Savings rates ballooned during the Covid-19 pandemic as Americans received stimulus checks while avoiding restaurants, travel, and other spending outside their homes. Once lockdowns lifted in 2022, consumers went on a spending binge, making up for lost time and driving the savings rate down precipitously. Savings rates have remained low into 2024, leaving banks like United and Piedmont to fight for deposits.
According to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, United is advised by law firm Bowles Rice LLP. Piedmont is advised by law firm Alston & Bird LLP.
