Now, an upstart New York hedge fund is trying to step into that pantheon of corporate bank raiders.
The hedge fund, Lion Point Capital, is pushing for changes at Ally Financial, one of the nation’s largest auto loan providers. Ally was rescued by taxpayers during the financial crisis, but has since failed to live up to investors’ expectations.
Lion Point joins a select group of activist investors to take aim at a national, deposit-taking bank as part of a wave of activism that has touched just about every industry in the last two years. It raises the prospect that activism will soon spread to big institutions, like Bank of America, that suffer from lagging share prices.
This week, some of the nation’s largest banks report their fourth-quarter results, which are expected to show modest improvement but no cures for their lackluster returns. There are also renewed calls — this time on the presidential campaign trail — to break up the big banks.
Lion Point’s campaign, however, shows the long odds activists face in trying to shake up or split up a large, underperforming bank.
Early this month, the hedge fund proposed two candidates for the board of Ally and urged the company to explore strategic alternatives. In a statement, Ally said Lion Point had a “clear agenda to force” the lender’s sale. Ally, formerly known as GMAC, said that path would not be in the best interest of its other shareholders.
Lion Point released a statement two days later, expressing disappointment with Ally’s decision to publicly disclose their talks. The hedge fund said that the strategic review was only one part of their proposal to Ally, without elaborating on other suggestions.
Often the mere disclosure of an activist campaign can cause a stock to soar. Ally’s shares, however, have fallen about 12 percent since Lion Point’s involvement became public last week.
Inside Ally, there is also frustration with the share price, which has slumped 31 percent over the last year. Long before the activist effort spilled out into the public, Ally was under pressure from many of its other hedge fund investors, which bought the bank’s shares after it went public in 2014 hoping it could ride the boom in auto sales, according to people briefed on the matter.
For now, the company’s largest shareholder, Cerberus Capital Management, remains supportive of the company’s current strategy, the people said.
But given the chance, Ally executives might entertain selling parts or all of the company, the people said. The reality, though, is that there are no obvious buyers for a bank with a market value of about $8 billion and more than $156 billion in assets.
Smaller banks that might covet Ally’s deposits and auto loans would face more regulatory scrutiny and costs if they bought the bank, which the Federal Reserve considers systemically significant. The nation’s biggest banks like Wells Fargo and JPMorgan Chase are already considered too big to make any major acquisitions.
“Finding an exit strategy for a bank the size of Ally is going to be difficult in the current regulatory environment,” said Frederick L. Cannon, a banking analyst with the investment bank Keefe Bruyette & Woods. “The number of potential buyers is going to be pretty small.”
One possible candidate is TD Bank Group, of Toronto, which has been acquiring smaller banks in the United States over the last decade, according to analysts and people briefed on the matter. So far, TD Bank has made no overtures toward Ally, the people said. A spokeswoman for TD Bank declined to comment.
Regulators keep a close eye on any investor that acquires a significant stake in a bank. Once a fund manager surpasses an ownership of about 5 percent, the Federal Reserve could come in and request a passivity commitment, preventing the shareholder from trying to influence operations at the company or starting a proxy fight.
If an investor tries to buy a stake greater than 10 percent, it must file an application with regulators for approval. These potential regulatory hindrances have dispelled activists from going after banks in the past. Lion Point owns about 1 percent of Ally.
Lastly, there are certain conflicts of interest that would arise from aiming at the largest banks. For one, many of the hedge funds use these banks to conduct their trading. Additionally, law firms that would help advise on the shareholder’s campaign also count these firms as clients and would be more hesitant in helping the activist.
Despite the popularity of activism over the last few years, the financial sector has been largely untapped. In the nonbank sector of the industry, Carl C. Icahn has recently been pushing the insurer American International Group to break itself up.
“There has been a lag of activists targeting this sector,” said Josh Black, editor of Activist Insight. “But it’s been building over a while by activists becoming more involved and looking for more targets in this sector.”
Lion Point was started in 2014 by former portfolio managers from the activist hedge fund firms Elliott Management and Perry Capital, ultimately raising about $950 million from investors.
Their fund joins about $350 billion in assets at activist-focused or partly focused funds, according to data compiled by Activist Insight, which tracks data on activism. The number of campaigns and amount of capital has increased the perception that the market is crowded, according to a report from FTI Consulting and Activist Insight; 40 percent of activist firms surveyed said that the opportunities had dwindled as more activists entered the fray.
The challenges do not make campaigns against financial institutions impossible, however.
In recent years, Nelson Peltz’s Trian Fund Management has gone after both BNY Mellon and State Street, two systemically important institutions. At State Street, Mr. Peltz achieved some of his requests, such as higher margins and share buybacks, but not everything. At BNY Mellon, he achieved a board seat.
In a number of ways, Ally appears ripe for a shake-up. Like many other large banks, its shares trade below book value, which is what the company would be worth if liquidated. All of the analysts who follow the company have a buy recommendation on the stock.
Even after Ally replaced its chief executive last year and hit many of its revenue, return and expense targets, its shares continue to slump, leading some to suggest that investors are simply wary of any lender with a large exposure to auto loans.
Ally has been expanding its lending to car buyers with less-than-pristine credit, which has helped bolster revenue. But the move also increases the default risks when the economy slows, analysts say.
“A big concern for the banks right now is credit,” said Mr. Cannon, the banking analyst. “Credit has been so good for so long that there is a natural normalization that is occurring.”
Keywords clouds text link
Dịch vụ seo, Dịch vụ seo nhanh , Thiết kế website , máy sấy thịt bò mỹ thành lập doanh nghiệp
Visunhome, gương trang trí nội thất cửa kính cường lực Vinhomes Grand Park lắp camera Song Phát thiết kế nhà thegioinhaxuong.net/
|aviatorsgame.com ban nhạc||confirmationbiased.com|
|mariankihogo.com ốp lưng||Giường ngủ triệu gia|
© 2020 US News. All Rights Reserved.