Chicago-Based MB Financial Bought By Fifth Third Bank

It’s a nearly $5 billion transaction involving a homegrown Chicago bank.

MB Financial was founded in 1911 as Manufacturers Bank at the corner of Division Street and Ashland Aveue. Now, MB’s 91 branches and $20 billion in assets are being scooped up by Cincinnati-based Fifth Third Bank. It’s one of the biggest acquisitions in the post-recession era, but some analysts wonder whether Fifth Third can make the deal work.

Eric Compton, equity analyst at Morningstar, says the deal allows Fifth Third to expand its base of small- to medium-sized corporate clients – and expand its regional footprint.

“I think probably the biggest factor was wanting to scale up within one of their key markets, the Chicago area,” Compton said. “After you combine Fifth Third and MB’s deposit bases, they become number two behind JP Morgan. Often having scale in a market tends to help. … Sometimes you can compete into an area and grow organically by stealing business, but then oftentimes the easier way is to just buy a business through an acquisition.”

While Compton hadn’t heard rumors of this deal, he said it fits within the overall narrative of mid-sized banks making plays for expansion. He expects more deals like this over the next several years – but cautions that the price of these acquisitions will be key.

“Bank valuations have run up a lot over the last year, year and a half. A lot of the banks I cover have returns of 50 to 100 percent over the last year and a half, which for an industry that grows 6 to 8 percent a year on average, that’s pretty high.”

Compton joins Chicago Tonight for a conversation.

Related stories:

How and When to Talk With Kids About Finances

A Very Volatile Stock Market: Should Investors Worry?

Investment and Financial Planning Advice for a New Year, New Tax Code