Deal hunger stirs among US banks at prospect of looser regulation

US banking mergers will accelerate over the next year, executives predict, driven by a more favourable approach from regulators, intensifying competition and the need to spend more on technology.

Anticipation about a surge in deals between American banks has been growing since Donald Trump won last year’s presidential election promising to cut regulation and unburden business.

But the volatility stirred up by Trump’s trade war threats has kept a lid on acquisitions, with only 78 so far this year — on track for one of the lowest annual totals in decades.

Banking executives, lawyers and analysts are hopeful the environment will soon turn more deal friendly. Several have predicted in recent weeks that more mergers will take place once there is greater clarity on US trade policy, interest rates and the economic outlook.

“My sense is that two, three, four months from now we are going to be a lot smarter about the economic backdrop than we are today . . . and given that, I think M&A will pick up,” Bryan Jordan, chief executive of Memphis-based bank First Horizon, said this month.

There are already signs of acquisitive instincts stirring among banks, including the informal talks BNY held recently with its smaller counterpart Northern Trust to explore a potential combination. 

Those discussions have yet to yield any concrete action, according to two people briefed on the matter who said BNY, launched in 1784 by US founding father and first Treasury secretary Alexander Hamilton, was working with advisers to study a prospective deal.

Robin Vince, BNY chief executive since 2022, is convinced this is the perfect moment to strike given the expected relaxation of takeover rules, according to the people.

He has publicly indicated he is open to acquisitions, telling analysts recently that while “it’s still a very high bar . . . we will be thoughtful if we see ways to make our business get faster and better”.

The US has one of the world’s most fragmented banking sectors, even after the number of lenders halved to just under 4,500 in the two decades to the end of last year. The vast majority are relatively small with less than $10bn in assets. 

Yet over the past four years the pace of deals in the sector has dropped by more than 50 per cent to an annual average of 173, according to LSEG data. There have only been $8.6bn of US bank mergers this year, tracking well below the typical annual total of almost $50bn.

Lawyers and analysts say a strict approach to bank mergers from regulators under former President Joe Biden held back deals in recent years. They think a major shift in regulators’ attitude in favour of banking consolidation will be critical in stimulating more takeover activity.

“Regulators are now looking more receptively on bank M&A and have the view that consolidation can be a positive,” said Rodgin Cohen, senior…