Report: Active 2025 in store for bank M&A

This year is likely to be especially active for bank mergers and acquisitions, according to Richmond, Va.-based law firm Hunton Andrews & Kurth. .Hunton Andrews & Kurth cited rising CEO confidence as a positive indicator of M&A potential. An improved economy and higher trading price multiples could reduce the valuation gaps between buyers and sellers that limited activity last year. ."Numerous variables could hinder deal activity, but improving economic conditions coupled with enhanced net interest margins from lower short-term interest rates and possible tax cuts should improve fundamentals," according to the Jan. 13 report. "Moreover, a less hostile regulatory regime should eliminate a risk overhang to earnings..The law firm also cited expected regulatory rollbacks under Trump as another factor that could increase M&A. In 2023, former President Joe Biden signed an executive order adding criteria for approving M&A applications while slowing the approval process. Hunton Andrews Kurth expects regulators will be less likely to reject mergers over the next four years. ."The prospect for a more relaxed antitrust enforcement regime — or at least less distrust of business combinations — could create significant opportunities for strategic growth and investment." .A successful effort by the Department of Government Efficiency to cut spending or reduce the pace of expenditures could cause long-term interest rates to fall, according to the report. Created by Trump, the department does not have rulemaking authority and is being led by businessman Elon Musk..Released Jan. 13, the outlook came after relatively high interest rates caused a slower pace of M&A in 2024, although several large deals were still announced. In the first 10 months of the year, 106 whole bank deals had taken place, far fewer than the 250 completed annually from between 2012-19. Only 96 deals were announced in 2023, the lowest number since at least 2000 and just more than half the 161 finalized in 2022. .The number of deals could fall short of projections if economic conditions worsen, according to the law firm. M&A could also worsen if there are any adverse impacts from President Donald Trump's plan to issue tariffs on Canada, Mexico, China and other trading partners..Another threat is the possibility that Trump's appointees to run regulatory agencies are delayed, pushing back his high-priority items such as tax policy and border security. Also posing a potential challenge is if the ongoing conflicts in the Middle East and Ukraine or other adverse situations impact markets.