Nearly half of bank leaders believe their institutions will buy another bank in 2025, suggesting a potential uptick in merger activity in the coming year, according to a new survey on M&A by Bank Director.

Forty-three percent of bank leaders said their institutions were very or somewhat likely to buy another bank next year, up from 35% a year earlier, Bank Director reported.

As for the reasons, respondents cited scale to drive technology and other investments (43%) and geographic expansion (37%) as the two most important factors driving acquisition strategies.

More than half of those considering acquisitions (55%) believe their bank’s stock is attractive enough to buy a target that meets their criteria.

The survey also found that deposit costs remain a concern, with 72% of all respondents citing it as a challenge to bank profitability.

Forty percent cited concerns about regulatory compliance costs as another challenge.

At the same time, more than a third pointed to an increased compliance burden as an obstacle to organic growth, up from 22% a year earlier, Bank Director reported.

Merger activity has slowed in recent years, driven by factors including unrealized losses on banks’ balance sheets and uncertainty about regulatory approvals.

At the same time, the interest rate environment has challenged bank profitability, depressing borrowing demand and making core deposits more expensive.