Private equity firms scale back bank buying
Private equity firms (private equity news) have been willing buyers of troubled banks. The likes of Stone Point Capital, Lightyear Capital and J.C. Flowers have led the surge. According to PitchBook Data, as noted by Institutional Investor, 75 commercial banks have received investments from private equity since the start of 2008. Activity has soared this year; 21 deals have been completed, with 12 deals on tap to close soon. That compares with 21 deals in 2009.
Thomas H. Lee Partners and Warburg Pincus Private Equity recently agreed to invest $171 million in Sterling Financial. But we've noted before that a key determinant is the FDIC.
Back in April, the FDIC said it would reduce the guarantees it would offer for bad loans. That reduced the ardor for these properties substantially. Some are even throwing in the towel.
Former FDIC Chairman William Isaac has given up on his bid to raise $1 billion for failed banks. Other investors are likewise scaling back plans. There are plenty of buyers out there sizing up properties, but many will have to be happy earning lower returns. So the big post-crash boomlet may be waning already.
- here's the II article
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