An aggressive merger and acquisition strategy is helping North Fork Bancorporation – a full-service commercial bank based in Melville, New York – to become an increasingly important player in an increasingly competitive US market.
Last October, the Fortune 500-listed bank with about $60bn in assets, completed its acquisition of Greenpoint Financial for $6.3bn in stock. Greenpoint was a $27bn bank, operating more than 90 branches, many located in New York City; it specialised in retail banking and also ran a mortgage enterprise.
North Fork’s purchase of Greenpoint followed its acquisition of The Trust Company, a New Jersey-based institution, for $726m. Both purchases are helping to transform North Fork into a major regional bank. They were also pulled off without any significant hitches – adding shine to North Fork’s management team and its ability to compete against rivals like US-based Citibank and Commerce Bancorp. Although there is more room for growth in the New York and New Jersey metropolitan area, no further buy-outs are planned, North Fork CEO John Adam Kanas told reporters in New York.
North Fork’s acquisitions strategy is paying off. In 2004, the bank, which went public in 1982, reported profits of $841m, up 40.3% from 2003. In Q1 this year, it reported a 20% annualised growth rate for total deposits. Loan growth also grew year-on-year in Q1 by 18% to reach $1.4bn. Housing loan originations from the bank’s mortgage subsidiary totalled $10bn in the current quarter, up from $8.2bn in 2004. “These tangible results confirm our original conviction that the 2004 acquisitions would create enormous value for our shareholders,” said Mr Kanas, when announcing the Q1 results.
The positive numbers will allow North Fork to stick to its plan to open more branches, despite the US Federal Reserve Board’s penchant to keep interest rates on the rise – a trend that threatens to eat into bank profits and that has persuaded some US institutions to adopt a conservative approach to spending.
North Fork, the 16th largest bank in the US, runs about 360 branches and plans to open new branches at a rate of up to 20 annually.
The bank’s seamless acquisitions, a customer base of about three million and a healthy financial state are fuelling rumours that it is a ripe takeover target for a heavyweight (North Carolina-based Wachovia could be one possible suitor). Meanwhile, its national mortgage banking business only sweetens the pot. For now, Mr Kanas is keeping mum about future plans.
MC
