By David French, Tatiana Bautzer and Pete Schroeder
(Reuters) – Big banks are holding off on acquisitions and staying cautious about the Trump administration’s pledges to unleash dealmaking, according to industry executives.
Treasury Secretary Scott Bessent said last week that bank mergers had been slowed by minor issues. Days earlier, newly installed regulators moved to scrap strict Biden-era rules that raised oversight of big transactions.
“The slowdown in deals which we have seen has been caused by a whole host of things,” said Bill Burgess, co-head of financial services investment banking at Piper Sandler.
While welcoming deregulatory signs, bankers and industry executives told Reuters that big mergers were stalled by market volatility, economic uncertainty, concerns about paper losses on banks’ balance sheets, and the complexity of transactions among large, heavily regulated lenders.
Cheryl Pate, senior portfolio manager at Angel Oak Advisors, expects some consolidation among smaller regional and community lenders, but sees larger combinations as challenging.
“I’m less optimistic about M&A at the super regional level, I think that’s still probably going to have a lot more scrutiny,” which makes mergers of equals “unlikely,” said Pate, whose firm manages $18.4 billion in assets.
For larger banks, only a few big targets would make sense to expand their businesses, so executives are prepared to wait for the right deal to come along. PNC Financial Services, U.S. Bancorp (USB) and Truist Financial are among the companies often cited by analysts as candidates for expansion.
The Republican-led board of the Federal Deposit Insurance Corp said on March 3 it will reinstate earlier guidelines for its bank merger review process, stepping back from the stricter framework of the Biden era.
“The FDIC’s 2024 M&A guidelines were, in some ways, a significant departure from historical practice,” said Randy Benjenk, co-chair of financial services at law firm Covington & Burling. Rescinding of the rules was an important step in returning certainty to the industry, he added.
“Productive and synergistic mergers are often slowed due to immaterial supervisory issues,” Bessent said in a March 6 speech to the Economic Club of New York. The Trump administration wants to refocus financial regulation after the overreach of Biden-era regulators, he added.
The caution around deals contrasts with the excitement after President Trump’s election in November. The expected deregulatory wave was forecast to make it easier for U.S. banks — of which there are more than 4,500 — to combine. While mergers still need to be reviewed, the new administration is doing away with some of the tougher guidelines set out last year.
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