No Match Found
Shrinking net interest margins, slow-moving regulatory deal reviews and bank stock prices still depressed by the FDIC’s interventions continue to suppress the industry’s anticipated consolidation. These and other mitigating factors outweigh the compelling trends that we see as a strong impetus to banking and capital markets dealmaking.
Among the compelling trends: the reinvention of banking business models powered by enterprise-wide digital transformation, new uses for artificial intelligence and, for some institutions, a desire for a different business mix that’s less reliant on interest rate spreads. Together, those forces form a foundational industry shift prompting banks to scrutinize their profit drivers, which business lines they operate in and how they’re organized. CEOs are pursuing their vision for how to compete in this unfolding new age of banking. And dealmaking will be in service to that long-range view, which may produce surprising tie-ups rather than adhering to historical patterns.
We may not have to wait too long to see what surprises are in store. The factors currently inhibiting dealmaking — stock prices, interest rates and regulations — are cyclical and when they change direction, they’ll constitute a tailwind spurring the long-anticipated consolidation wave.
Much time has been spent over the past 18–24 months discussing sector trends that are expected to drive deal activity between financial institutions. Just as important are several impediments keeping potential buyers on the sidelines.
“The bedrock business model that banking is built on continues to shift. Transformation is top of mind for every executive but it’s not one-size-fits-all; it’s taking various shapes as they formulate a strategy for the dawning of a new age of banking.”