Bankers and deal advisors remain optimistic about the outlook for mergers and acquisitions following a decline in interest rates last year and after the Trump administration reclaimed the White House with promises to ease regulatory burdens.
But bank M&A activity has yet to take off. Deals in January were essentially in line with the modest pace of a year earlier. Eleven bank acquisitions, worth a combined $678.4 million, were announced last month. That compared with 12 transactions for a combined $566.7 million in January 2024, according to S&P Global Market Intelligence data.
At least three more deals were inked in the first half of February, including the
What happened?
Jacob Thompson, a managing director of investment banking at Samco Capital Markets, told American Banker that President Donald Trump's campaign vows to ease regulatory scrutiny spurred predictions for a surge in deal activity in 2025. Elevated regulatory pressure under the Biden administration had slowed dealmaking in recent years.
However, Thompson said the new administration's chaotic first few weeks in office — including federal agency cuts, widespread layoffs and threats of
The Federal Reserve cut interest rates three times in the second half of 2024 after the inflation rate dropped below 3% from a peak of 9% in 2022.
But Fed policymakers cautioned that new signs of rising costs could ward off further reductions this year. Inflation crept back up to 3% in January.
"The rolling back of a difficult regulatory approval process for M&A remains a catalyst, but the ham-handed way in which the new administration has handled its first month or so has injected a lot of uncertainty," Thompson said. "People making decisions about something as big as an acquisition really don't like uncertainty."
Thompson said small banks are still struggling with lofty technology costs, management succession challenges and stiff competition from larger lenders. All of these factors are likely to bring more banks to the sale block. Bigger banks are looking for even more scale, keeping buyer interest high.
"So I'm still bullish on bank M&A for this year, but I'm not as bullish as maybe I was or as many others were," Thompson said. "Higher rates for longer would create issues. Just because you can do an M&A deal doesn't mean you should. You have to be judicious about the deals you go after."
There were
While deal advisors say M&A talks had increased after the election, and bankers were upbeat about the prospects for deregulation and lower compliance costs, "people are also growing more cautious about inflation and the prospects of higher rates for longer," Mike Matousek, head trader at U.S. Global Investors, told American Banker. "High rates are like an anchor. They just slow things down."
He said the fresh uncertainty in Washington was bound to push some bank buyers to the sidelines. "You tap the brakes because you just don't really know what's coming next," Matousek said. "You hold out until you have some idea where things are headed."
Matousek also noted that deregulation, historically, is a lengthy process. "It's not like flipping a switch," he said.
The chief executive of SouthState Corp., for one, said he is waiting for clarity after closing in January the
"For 2025, our focus is entirely on integrating" Independent CEO John Corbett said on the company's recent earnings call. SouthState has about $64 billion of assets. Corbett wants to see whether regulatory obstacles related to crossing the $100 billion-asset threshold will get lowered under the Trump administration.
"Until we know what those hurdles might be," he said, "we think the $60 billion to $80 billion in size is the best place to be, but we're going to learn more as the year progresses."
Tom Michaud, president and CEO of investment bank Keefe, Bruyette & Woods, said there is no question that 2025 is off to a slow start on the M&A front. From his view, however, it is more a matter of bank buyers gaining a firmer sense of the Trump administration's overall direction and, from there, forging ahead with acquisitions needed to gain size, new business lines and geographic diversity.
At KBW's bank investor conference last week, he said, "the tone was noticeably more optimistic than the last couple years" among both bankers and investors.
Michaud said the prevailing opinion was that more bank consolidation "was necessary." While the pace so far this year proved tepid, "there's a sense that more is coming, that you will see more and more transactions."
He said deal talks take months to develop. Given that the Trump administration took office in January, it may take a quarter or two to see fresh momentum materialize. "I think you just have to give it a little more time," Michaud said.
