Loonie and Euro riding high, foreign banks may look to southeast Florida market – analysis19 October 2007

Canadian and Spanish banks are expected to remain acquisitive in the southeastern region of Florida, industry sources said.
The weak US dollar and drop in the price of many banks’ shares provide an opportunity for foreign banks to enter the region or expand their branch networks there, a Florida investment banker said.
While the Carolinas and northern Florida have often been reported as areas of interest to Royal Bank of Canada’s US subsidiary, an industry executive thought foreign banks should also consider looking further down the Florida coast.
"Southeast Florida is the best market in Florida for a potential acquirer," said the executive, who works in the market.
A company insider at Banco de Sabadell SA said the Spanish bank is looking to make additional buys in the Miami area following its acquisition of Transatlantic Holding Corporation earlier this year. The insider said Sabadell's goal is to acquire banks and form a regional player.
The Florida banker said BankUnited Financial, BankAtlantic Bancorp, Ocean Bankshares and SeaCoast Banking are all possible southeast Florida targets.
"The foreign banks are looking to the Southeast and they are looking for large deals," the banker said. He added: "There is a tremendous opportunity for foreign banks to acquire."
The banker said in the past few months, banks he represents in Florida have received offers from foreign banks, but the offers were not the winning bids.
BankUnited is trading near its 52-week low of USD 11.35, with a market cap of USD 400m. It has a book value of around USD 805m and assets of USD 14.5bn.
As a thrift, it has been particularly impacted by the slowdown in Florida’s real estate market. The bank predicted earlier this month it will report 4Q earnings per share 37% to 53% lower than 4Q 2006.
BankUnited, Ocean Bankshares and SeaCoast did not return phone calls. It is understood that BankAtlantic is not publicly interested in a sale.
The upturn in interest comes as RBC Centura, a US subsidiary of the Royal Bank of Canada, acquired Alabama National Bancorporation (ANB) in September, and Toronto-Dominion Bank acquired Commerce Bancorp, the New Jersey-based bank with a presence in southeast Florida. Commerce had said prior to the TD deal that it planned to grow to 200 branches in the Florida market.
A Canadian lawyer, who has been involved in cross-border financial deals, said Canadian banks could show interest in Florida but generally speaking, given the flattening out of the US dollar, transactions could take place anywhere in the US.
The lawyer said because regional banks do not have the same exposure to sub-prime issues as the larger US banks, “they continue to be attractive targets for Canadian banks.”
“My sense is that Scotiabank will continue to focus on Latin America but they could be the most interested in southeast Florida if there was a bank with a Latin American focus,” the lawyer said. He also said CIBC is the only major bank that has not made a large acquisition in the US to-date, but given the strength of the Canadian dollar, they could become active.
Along with its US acquisition, RBC acquired RBTT Financial Group, a Trinidad & Tobago based financial services firm, in October. The RBTT and ANB acquisitions give RBC retail banking locations both north and south of the southeast Florida market.
Spanish banks have also demonstrated interest in southeast Florida. Earlier this year Banco Popular Espanol acquired TotalBank and Sabadell acquired Transatlantic. The two targets sold for USD 300m and USD 175m or 2.3x and 3.4x book, respectively.
Bank valuations in Florida have dropped to around 2.5x book on average in recent deals, according to the Florida banker. In the past, Florida banks had been seen as overvalued.
Other benefits to Canadian and Spanish banks: many Canadians vacation or live in Florida and the market has a large Spanish-speaking population, according to industry sources.
A second investment banker pointed out, however, that while a weak US dollar may make American banks cheaper to acquire, the banks’ earnings are also relatively lower, so the actual value of a deal is lower than it may first appear.
He added it is difficult for a foreign bank to enter the US market for the first time because the bank is unable to take advantage of the synergies and economies of scale native banks often enjoy. Foreign banks with an established US presence are likely to look to targets in area contiguous to their current branches, he said.

by Jay Antenen in New York, Cheryl Thompson in Toronto and Rupert Cocke in Barcelona

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