look for merger or acquisition partners from stronger minority banks, according to Paul C. Hudson, chairman and CEO at Los Angeles-based Broadway Financial Corp., parent of Broadway Federal Bank (No. 4 on the BE Banks list with $356.8 million in assets). Others may become poised to gain deposits and add income streams by filling in the void left by larger banks who are exiting certain business lines.
William Cunningham, senior investment adviser with Creative Investment Research Inc. in Washington, D.C., which specializes in minority banking, says that black-owned banks may be better equipped than their competitors at managing risk in their loan portfolios because they have traditionally dealt with a credit-challenged customer base. Even so, the new landscape will force black banks to venture outside of their traditional comfort zone. While being conservative has served many banks well, Cunningham says black banking outfits will now have to be more aggressive. That means they will need to do more advertising to go after new customers in a market where a larger bank is financially troubled or no longer exists.
Louis E. Prezeau, CEO of City National Bank of New Jersey (No. 3 on the BE Banks list with $449.9 million in assets), says maintaining a strong liquidity position to continue to make loans to small businesses, individuals, and nonprofit organizations such as churches will be among the challenges for his and other banks. “We certainly will not stop lending in our community for viable business, however, we will be using more due diligence to make loans that people and businesses can repay.â€
PRIVATE EQUITY FIRMS: FEWER DEALS
As a result of the credit crisis, buyout activity has dropped from record levels last year, according to Sandy Anglin, a research analyst at Thomson Reuters. In the first three quarters of this year, there were $230.6 billion of private equity mergers and acquisitions, down from $748.2 billion the same period last year. Anglin says a lack of financing is driving down the number of deals. “Until the credit markets stabilize and trust returns to the banking industry, there will be little lending and thus little private equity activity,†Anglin says.
The tightened lending conditions could make it tougher for BE Private Equity Firms to land future deals and harder to compete for the ones that are available, says Gwendolyn Smith Iloani, president and CEO of Hartford, Connecticut-based Smith Whiley