U.S. Bancorp's Richard Davis, a man never to be confused with the likes of Charlie Sheen when it comes to self-preservation and the exercise of plain old prudence, was quoted not long ago in an article in the American Banker (paid subscription required) to the effect that it would be a frosty day in the land of Beelzebub before his bank ever ventured where Chase is sorry it ever went.
"In the old days it was about credit risk, and uncertainty about who you would acquire as it relates to long-term, systemic credit surprises," Davis said at the Bank of America Merrill Lynch Banking & Financial Services Conference in New York on Tuesday.
"But it is all about compliance now and as you've seen in this environment, you will be held accountable from day one for the company you buy," says Davis, who is U.S. Bancorp's chairman and chief executive. "And you can be held accountable for things up to 10 years in the past, even if they were approved back in the old rules that have changed."
"Anyone who is going to do a deal needs to be very careful that they are not bringing a virus into a healthy room," Davis says.
While the article notes that Davis has long been cautious about the unintended consequences of acquisitions (a virtue not possessed by our federal legislators), he believes that the "little guys" will be engaging in M&A.
"You might see a 10 and a 10 trying to get to 20, or a 10 and a 15 thinking about 25," Davis says. "You'll see a lot of fours and twos getting to six."
Obviously, he's talking about the billions of dollars in assets possessed by the banks who will be merging.
I think that he's right. The biggest will grow organically, but the less-than-behemoths will grow by devouring both compatriots and their children. It's not a question of "if," it's only a question of "when."