Old National CEO Rules Out Bank Deals For Now: 'We Don't Need It' For Returns
CEO Jim Ryan pointed to hiring and buybacks instead of acquisitions, as the bank reported third-quarter earnings per share of 66 cents.
Old National Bancorp CEO Jim Ryan told analysts on the bank's third-quarter earnings call that 66 cents of earnings per share is being built without acquisitions, and that more bank deals are not on his agenda. Asked about M&A by an analyst at RBC Capital Markets, he said "I don't think this is the time or place for us to thinking about more M&A."
What Ryan said about M&A
Ryan said the market is difficult, with rising rates and buyers fixated on day-one tangible book value dilution. He added:
What Ryan said about M&A
Ryan said the market is also difficult, with rising rates and everyone focused on day-one tangible value dilution. He then gave the bank's own reason: "we don't need it to support the kinds of returns we're putting up. We don't need it for the growth we're putting up."
He pointed to hiring and talent as the substitute, and to buybacks, whose returns he called "really strong." He said investing in the bank and "continuing to build the foundation to be a larger organization" would leave it well placed, and that M&A could be revisited "in a couple of years." Today, he said, "it's not something we spend any time on."
The analyst's question cited a 19.5% return on tangible common equity and 15% EPS growth. Chief Financial Officer John Wark put the quarter's return on tangible common equity at 19.6%, which he called top decile against peers, with return on assets of 1.37%.
Hiring and the buyback
Michael Maganelli, the Executive Vice President and Chief Credit Officer, said 19 of the bankers hired were net new and seven were replacements, for 26 total. He said most of the 19 commercial relationship managers will focus on commercial and industrial lending in metro markets. Ryan said the hires include two in Cleveland and two in Columbus.
Maganelli said the market for talent is very aggressive, and net additions to the banker base will continue. Wark said commercial hires typically pay for themselves inside a year to a year and a half.
Wark said the bank repurchased $100 million of stock in the quarter and has $177 million left on its authorization, which runs through the end of February 2027. He expects to use it all, perhaps more opportunistically. Full-year loan growth, he said, should land at the lower end of the 6% to 8% range, with mid-single-digit growth expected in the fourth quarter.
What to watch
Wark said management will return in January to refresh its assumptions for 2027 and will set a new buyback authorization in February. If proposed Basel III capital changes are adopted as written, he said, the bank would gain roughly 100 basis points (one percentage point) of common equity capital, which may let it reconsider the size of that authorization.
Wark also tied the bank's efficiency ratio, which was below 50%, to the scale added with the Bremer deal, and said the bank will keep investing in hiring rather than another acquisition.
Sources
- Old National Bancorp (ONB) Q3 Earnings Match Estimates — Yahoo Finance
- Old National Q3 Adj. EPS $0.66, Inline, Sales... — benzinga.com
- Old National Bancorp: Q3 Earnings Snapshot — Associated Press
- Old National Bancorp GAAP EPS of $0.66 in-line, revenue of $712.73M misses by $19.28M (ONB:NASDAQ) — seekingalpha.com
- Countdown to Old National Bancorp (ONB) Q3 Earnings: A Look at Estimates Beyond Revenue and EPS — Yahoo Finance
