“It’s a nice day for a white wedding . . . ”

Billy Idol

The market is interpreting challenging earnings reports as an indication that suitors will emerge and rescue these damsels in distress. This time it’s different? No, this time it’ll likely be the same as other periods of consolidation. It’ll begin slowly, build momentum and ignite a feeding frenzy. Many buyers will overpay, overextend and over-promise, while few will maintain their diligence to price and quality. Also, the institutions will not require major multiple differentials to ignite an M&A swell as that was not required during the last wave of activity. Should this cycle even slightly emulate that of the most recent merger mania in the mid and 1990s, the industry will experience a significant increase in merger and acquisition activity over the next few years.

Merger and acquisition announcements year-to-date topped $190 billion …

In our view, potential thrifts that may be added to the S&P 500 Index include New York Community and People’s United Financial. The primary factor driving the future potential changes to the S&P 500 Index is the merger and acquisition environment in the financial sector.

Pending deals in the financial sector include Banco Bilbao Vizcaya’s purchase of Compass Bancshares, which is expected to close in the beginning of September and the deal for SLM Corp which is forecast to be completed by the mid-October and is the subject of much press as it relates to pricing as well as closing.

The Standard and Poor’s does not necessarily replace a stock that has been dropped with a stock from the same sector. For example, Standard and Poor’s announced that Hudson City Bancorp would replace American Power Conversion which was acquired by Schneider Electric on February 6, 2007. Smith International (SII-$63.04) replace Golden West …