Many non-banks consider acquiring a bank (or establishing a de novo bank) to serve their customers and, frankly, capture various benefits afforded to a bank. Before embarking on this strategy, it is critical to determine the order of magnitude of the benefits as well as the costs of operating in the tightly controlled bank environment.
Endurance Advisory has identified three key benefits for non-banks.
On the cost side, myriad regulations, administrative burdens, and compliance requirements must be considered.
Non-banks may buy a bank to capture the value of providing financial services directly. For example, a non-bank that can transfer loan receivables to a bank (e.g., the loan pipeline of a mortgage bank or loans made by a non-bank finance company) benefits from lower borrowing costs. Payments business – wires, ACH, debit card, credit card – flow through banks, so all of those fees remain in the new bank. Finally, deposits are valuable, and the new bank’s franchise value rises to the extent that the company controls deposits. These three areas of potential benefits must be weighed against the costs of operating as a bank.