STL - The Webster-Sterling Merger Creates a Strong Bank But Can it Continue to Create Value?
The announcement from Webster Financial Corporation (NYSE: WBS) and Sterling Bancorp (NYSE: STL) that the two plan to partner in a merger of equals marked the second such deal in the regional banking space in April. It was also the second merger of equals that was met with skepticism from the market. Shares of Webster, the technical buyer and surviving institution in the deal, dropped considerably following the deal. While shares have since recovered decently, I was surprised to see such a sudden drop when the deal creates such a high-performing bank.
But investors may be wondering whether the deal can offer substantial upside from the returns each bank could generate on their own. Let's take a look at the deal and whether it can create value for shareholders.
Headquartered in Connecticut, Webster is a $33 billion asset bank that operates largely in New England and a small portion of New York. The bank's main differentiator is that it runs a national health savings account (HSA) business that helps it generate a very low-cost deposit base. This business also involves offering health reimbursement arrangements and flexible spending and commuter benefit account services. Sterling Bancorp is a roughly $30 billion asset bank that largely operates in New York, but also runs some national and more specialized lending businesses. The bank is also in the process of launching a banking-as-a-service (BaaS) operation in which it helps digital non-bank companies offer banking services by essentially using Sterling to handle the back-end operations.
For further details see:
The Webster-Sterling Merger Creates a Strong Bank, But Can it Continue to Create Value?