With the recent bounce back of the banking industry, initial public offering (IPO) activity levels have been higherfor banks seeking fresh capital.
Here are some recent statistics:
· In 2013, 222 U.S. companies went public, raising $55 billion; the most activity since 2000
· Four banks completed IPOs in 2013, raising $335 million
· Seven banks have already filed for IPOs in 2014, four of which have completed offerings and raised $254 million
· 2014 is shaping up to be the most active year for bank IPOs in a decade
· Equity markets have recovered from the recession, and valuations have improved sufficiently for banks to consider an IPO
· Five of the last six banks that went public were owned by private equity firms
With the banking industry being as healthy as it has been post-recession, the extended low interest rate environment has changed the industry’s profitability. Most banks have improved asset quality, returned to profitability and boosted capital ratios.
Net interest margin compression is overpowering banks that lack sufficient loan growth and as a result, banks capable of growing loans through acquisition or market expansion are attracting the most investor interest.
The IPO window is wide open and if the trend continues, 2014 should remain as the most active year for bank IPOs in more than 10 years.
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