The Trump administration’s push for bank deregulation has not yet spurred a wave of big mergers as market volatility and regulatory uncertainty continue to weigh on the industry. Large banks remain cautious about pursuing acquisitions despite efforts to ease the merger approval process. Experts cite a range of factors contributing to the slowdown in deals, including economic uncertainty, the complexity of large transactions, and the memory of past bank failures.
The regulatory landscape also remains in flux, with interim leadership at key agencies like the FDIC and the Office of the Comptroller of the Currency. The slowdown in deals has been caused by a host of factors,” said Bill Burgess, co-head of financial services investment banking at Piper Sandler. He noted that while banks welcome signs of deregulation, market volatility and other challenges have kept them from moving forward with significant mergers.
Cheryl Pate, senior portfolio manager at Angel Oak Advisors, expects some consolidation among smaller regional and community banks but sees larger mergers as more complex. I’m less optimistic about M&A at the super-regional level; I think it will still face significant scrutiny,” said Pate, whose firm manages $18.4 billion in assets.
Regulatory uncertainty hinders major bank mergers
For larger banks, only a few big targets make sense for expansion, so executives are prepared to wait. PNC Financial Services, U.S. Bancorp, and Truist Financial are often cited as potential candidates for expansion. The $35-billion merger between Capital One and Discover Financial Services, announced in February 2024, has yet to receive regulatory approval and serves as a litmus test for the new administration’s approach.
Industry executives also point to Toronto-Dominion Bank’s failed $13.7 billion acquisition of First Horizon as a cautionary example of the challenges facing big deals. Rising U.S. interest rates have caused banks to hold swelling paper losses on securities portfolios, which would become actual losses in the event of a merger. Around two-thirds of large U.S. banks are considered to have unsatisfactory practices in areas such as governance and liquidity risk management, further complicating the merger landscape.
Despite these obstacles, some experts believe the industry is ripe for consolidation. Over time, I think unrealized losses will decline, and deals will return,” said Jason Goldberg, an analyst at Barclays. Banks need clarity on what regulators require for merger approval.”