Driven in part by expectations for modest growth in the U.S. economy, almost half of the bank executives and directors participating in the 2018 Bank M&A Survey believe that the current environment for bank M&A is more favorable for deals, and 54 percent say their institution is likely to purchase another bank by the close of 2018. U.S. banks announced 191 deals through October 27, 2017, according to S&P Global Market Intelligence, and is on track to close the year on par with 2016, which closed with 241 deals. With that in mind, it’s perhaps no surprise that 40 percent expect a stagnant deal environment.
The 2018 Bank M&A Survey, conducted through September and in early October of 2017, is sponsored by Crowe Horwath LLP. It features the views of 189 chief executive officers, directors and senior executives of U.S. banks on the U.S. economy, the bank M&A environment and their own M&A strategies.
The unfettered optimism felt by the banking industry in the wake of the election of expected deregulator-in-chief Donald Trump has been tempered with the reality that regulatory relief largely hinges on the actions of the U.S. Congress. One-third of bank executives and board members lack confidence that the Republican majority will be able to push through regulatory relief for the banking industry by the end of 2018. But hope springs eternal for most bank leaders. Fifty-nine percent expect modest relief for the industry.
Where President Trump and his administration can best impact the nation’s banks is through his appointment of regulators. Fifty-eight percent believe that Donald Trump has had a positive impact on the banking industry. As of November 30, 2017, Trump has appointed Randy Quarles, who’s viewed as a moderate deregulator, as vice chairman of supervision for the Federal Reserve, and former OneWest CEO Joseph Otting as Comptroller of the Currency. Janet Yellen will leave the Fed when she is replaced as chairman by current Fed board member Jerome Powell in February 2018. Trump has nominated economist Marvin Goodfriend to fill an open seat on the Fed Board of Governors, and announced he will nominate Fifth Third Bancorp Chief Legal Officer Jelena McWilliams to chair the Federal Deposit Insurance Corp. The permanent leadership of the Consumer Financial Protection Bureau—not addressed in the survey—is also in flux. Ninety-seven percent of respondents believe that these regulatory appointees will be more sympathetic to the banking industry.
- Forty-four percent indicate that rising bank valuations have made it more difficult for their bank to compete for or attract suitable acquisition targets.
- When asked about the kinds of acquisitions the bank is willing to make, 83 percent say their board and management team would consider a market extension, and 78 percent an in-market deal. Twenty-eight percent would consider an out-of-market deal.
- Few—just 7 percent—are likely to acquire a fintech company by the end of 2018.
To view the full results to the survey, click here.