Bank M&A Likely to Grow in 2025

2025 could be a “banner year” for bank mergers and acquisition according to recent research by law firm Hunton Andrews Kurth.

The analysis suggested that whilst numerous variables could hinder deal activity, improving economic conditions coupled with enhanced net interest margins (NIMs) from lower short-term interest rates and possible tax cuts will help improve fundamentals.

Moreover, a less hostile regulatory regime should eliminate a risk overhang to earnings. The prospect for a more relaxed antitrust enforcement regime or at least less distrust of company mergers could create significant opportunities for strategic growth and investment.

Among the positive factors that should increase M&A activity are increasing CEO confidence and the solid performance of the overall stock market.

CEO confidence continues to go up, which may give C-suites and boards the necessary conviction to pursue M&A. If economic conditions improve, then capital markets should also strengthen as M&A volume frequently tracks stock market performance.

President-elect Trump’s administration is also likely to be less hostile to proposed mergers than the Biden administration, although the law firm cautioned that “populist views in the Trump administration and Congress that may scrutinize major consolidations or mergers, particularly if they will impact U.S. jobs.”

Lower interest rates combined with Trump’s pledges to lower taxes and cut regulation may also fuel bank M&A.

While a significant uptick in M&A activity is expected, the report said there could be a particular increase in the volume of private equity exits and strategic divestments.

The report said there was a risk M&A activity in 2025 may fall short of expectations, particularly if economic conditions deteriorate. Specific factors that could adversely impact M&A in 2025 include trade wars, inflation, state bank regulation, and geopolitical risks.