Could Eastern Bank's IPO Prompt a Wave of Mutual Savings Bank Demutualizations?
I was absolutely shocked to hear the recent news that Eastern Bank, the nation's largest mutual savings bank, had filed documents with the Securities and Exchange Commission to commence what could end up being a $2 billion IPO. Not only does the move seem like a major departure from its culture by the very nature of becoming a publicly traded company, but I was also surprised because the bank appeared to be doing well.
The bank grew total assets by about $2 billion over the last five years, reaching $11.6 billion and representing about 21% growth. Maybe it wasn't doing a regular 10% compounded growth each year, but it is still the third-largest state-chartered bank in Massachusetts -- an extremely competitive banking market with 110 state banks, according to the FDIC, as well as a heavy presence from some of the larger players, such as Bank of America (NYSE: BAC) and Citizens Financial Group (NYSE: CFG). The bank also managed to establish this strong presence while donating 10% of its profits each year to charity.
In its prospectus, Eastern cited the fact that going public would make the company a "more attractive and competitive bidder for mergers and acquisitions of other financial institutions or business lines as opportunities arise." I believe this is the main reason Eastern is going public. It's also a factor that could lead many other mutual savings banks to follow suit.
Source Fool.com
