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Depressed valuations for banks and other financial companies mean "it's time" for acquisitions and mergers in the sector, said Monday a former Wells Fargo CEO.
"Every time you apply strict regulation in any sector, you get a concentration and the banks are not expensive," Richard Kovacevich told CNBC's Closing Bell.
Financial stocks are lagging the rest of the market since the beginning of the year and are trading at lower price multiples than companies in other sectors.
This year has already been marked by some consolidation of the financial sector. In February, BB & T announced its intention to acquire SunTrust Banks in "a peer-to-peer merger", the largest banking transaction since the financial crisis of the last decade. The Wall Street Journal reported Monday that Charles Schwab was in talks with USAA for the acquisition of the company's brokerage and wealth management units.
Kovacevich said he thought mergers and acquisitions would be concentrated among the smaller financial companies because of regulatory restrictions imposed on big banks.
"I think you're talking more in the sub-[$]10 billion euros consolidating with the[$]10 billion badet banks, or within these categories, "said Kovacevich.
Several major financial institutions publish their quarterly reports this week.
Citigroup was the first major bank to report earnings, exceeding badysts' expectations in terms of revenue and earnings per share, thanks to the initial public offering of Tradeweb, a negotiation of electrical obligations. Citigroup shares closed virtually unchanged on Monday, ending the year down less than 0.1%.
Wells Fargo, Goldman Sachs and JPMorgan Chase publish their results before the bell on Tuesday. Bank of America, Morgan Stanley, American Express and Blackrock will all follow later in the week.
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