Plenty of PE Opportunities in Banking, Despite TARP Repayments

Lincoln Financial this week became the latest bank to repay its TARP funds, in part thanks to last year’s sale of money management unit Delaware Investments to Macquarie Group. Kind of like how BoA paid back a bunch of money thanks, in part, to the sale of First Republic Bank to Colony Capital and General Atlantic.

But never fear financial buyers: A smattering of TARP repayments does not mean that banks are no longer a source of sell-side dealflow. As one PE exec said: “There are plenty of troubled banks with more than 700 on FDIC troubled bank list.”

In fact, the FDIC lists 251 banks that have failed this year.

Banks, even the problem ones, provide a chance for buyout shops to buy cheap deposits that can be grown and loaned out for decent returns. Well, most of the time (think TPG’s WaMu debacle).

Despite such blowups, banks still provide the potential for good profits. Moelis Capital Partners and Angelo Gordon & Co. are looking to buy stakes in banks in Georgia and Texas. Warburg Pincus and THL Partners recently announced a combined $278 million investment, or 40 percent, in Sterling Financial Corp. However, their investment is conditioned on Sterling raising at least $720 million of capital.