Big Bank Deals: Trump's Return Could Spark M&A Frenzy

As the dust settles on the 2024 U.S. presidential election, the banking industry is abuzz with anticipation of a potential M&A boom under a second Trump administration. Bank executives and analysts alike are predicting a surge in deal activity, with regional banks leading the charge. Let's delve into the factors driving this optimism and the challenges that could dampen the M&A fervor.

A more business-friendly regulatory environment is expected to grease the wheels for higher-dollar M&A under a Trump administration. The incoming regime is anticipated to expedite merger approval processes, particularly for smaller banks under $50 billion in assets. This could lead to a "very marked pick-up in the number of announced transactions" in this segment, according to Brian Graham, a partner at Klaros Group.

However, the outlook for mid-sized regional bank mergers remains uncertain. While the Trump administration may facilitate larger deals, the politicization of federal banking agencies could lead to a pendulum swing back to around 2018, with agencies harmonizing policy and imposing greater scrutiny on certain transactions. Additionally, Vice President-elect JD Vance's populist leanings could introduce uncertainty regarding the administration's stance on big bank deals.



Regional banks with over $100 billion in assets are expected to be the most active in the M&A arena. Huntington Bancshares, Fifth Third Bancorp, and Comerica are among the regional banks expanding their footprints in the Southeast, aiming to compete with larger rivals like Truist and the nation's four biggest banks. By merging, these regional banks could accelerate their expansion and gain a competitive edge.

However, the recent experiences of large bank mergers, such as Truist, have raised concerns among regional banks considering M&A. The rocky integration of SunTrust and BB&T has left investors wary of mergers of equals, making them prefer deals with clear buyers and sellers. Nonetheless, regional banks may still consider strategic acquisitions to expand into contiguous markets or enhance earnings, as long as the deal is accretive and has strategic value.

The regulatory milieu and higher interest rates have also been roadblocks to deal activity. However, a post-election economic surge and boost to banks' stock prices could mitigate these concerns, making deals more palatable for both buyers and sellers.

In conclusion, the banking industry is bracing for a potential M&A boom under a second Trump administration. While regional banks are expected to lead the charge, the success of these deals will depend on strategic value and accretive earnings, rather than just size. The Trump administration's stance on big bank deals remains unclear, but it is expected to be less negative than the Biden administration. As the dust settles on the election, the banking industry eagerly awaits the regulatory environment and M&A landscape that a second Trump administration will bring.