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Deal momentum in banking continues and more could be on the way
Regional bank dealmaking is on an upward trend in the second half of the year, a wave of activity that we were optimistic about in our deals report at midyear. The desire to increase scale, expand geographic reach, and realize synergies to amplify growth are drivers of the recently announced large bank mergers.
There is, we believe, much more pent-up demand which can fuel greater deal activity. M&A can be an accelerant for change amid the twin pressures to adopt new technologies and operate more efficiently. Those twin forces are the motivating force behind the recent large bank deals that captured the public’s imagination, but make no mistake there is a vibrant undercurrent of activity among smaller institutions facing the same challenges. Also playing a role are changing regulations, yet it is today's shorter deal closing timelines that allow for a more efficient deal life cycle and a higher probability that a deal thesis will be fully executed.
Additionally, we reiterate our expectation that payments and fintech organizations will utilize deals to drive growth and scale. This year’s resurgent IPO market for fintechs could be a leading indicator that the industry will remain at the leading edge of AI powered products and payment capabilities. So far this year, six US fintech IPOs raised about $3.2 billion, the highest level in at least a decade, according to S&P Global Market Intelligence data.
Indicators that support more bank tie-ups are all around us:
Banking fundamentals are healthy with earnings boosted by growing net-interest margins while loan provisions remain stable.
“Synergies plus transformation” is essential. Cost reduction levers (rationalizing branches, reducing overhead) are just one aspect of a deal’s thesis. Now, value comes from tech simplification and core modernization along with greater efficiency.
More interest rate cuts, fewer macroeconomic shocks, and an industry-favorable regulatory climate could provide the clarity that banks need to be even more acquisitive.
Key M&A trends set to influence banking and capital markets
We expect buyers to face intense competition in the pursuit of the best assets and growth platforms. They’re putting the most weight on three issues that can determine the success of a future deal:
- Federal regulators took a number of steps relating to regulatory approval criteria this past year, which will continue to encourage dealmaking as it is evident that regulators are open for business. Senate confirmation of a permanent chair of the Federal Deposit Insurance Corporation (FDIC) could further embolden those considering M&A. Additionally, the Office of the Comptroller of the Currency’s (OCC) recent realignment of supervisory categories is expected to be joined by a change to asset-based regulatory categories. That change may provide relief from capital, liquidity, oversight, and reporting, paving the way for greater deal activity.
- Concerns over delinquent loans are increasing the aperture around credit diligence. Buyers are expanding loan file reviews, re-underwriting higher risk books, and stress-testing.
- Technology diligence is at an all-time high given that there is little room for error when merging systems which are being built around AI. Buyers need a clear view of what it will take to fold the acquired business into their already jammed technology ambitions. Equally important is identifying the growth advantages provided by a target’s existing tech capabilities, such as in using blockchain technology to speed up cash or custody settlement.
“Banking deals could dramatically grow in pursuit of transformation. The confluence of lighter regulations, falling interest rates, and powerful technology is profoundly affecting corporate strategy.”
Dan Goerlich,US Banking Deals LeaderThe bottom line: What banking and capital markets dealmakers should watch in 2026
It remains essential for management teams to have a comprehensive playbook for capturing value and growth from transactions. This is especially true ahead of a potentially landmark change in asset-based regulatory categories. The concerns around deposit growth and cost of funds still command center stage. Yet, AI integration is equally important to address. Many institutions see scale as the shortest path to realizing AI's promise. Banking deal activity is likely to remain healthy given the favorable backdrop of a lighter regulatory landscape, a growing economy, and stable profitability.
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