Bank M&A slows due to uncertainty

There has been a drop in community bank M&A activity in the first half of this year due to bond depreciation, said TruStar Advisors Co-Founder and Managing Partner Craig Mueller. Fifty-nine community bank deals had been announced so far this year as of late May, trailing the pace of last year, when 182 deals were announced. .Mueller sees bond depreciation as the biggest limiting factor in M&A. Banks with strong credit and deposits not lent out are attractive for potential buyers as they can be converted into cash and funded either with their current merged balance sheet or converted into new loans. “Deposit-rich banks are in high demand,” and garnering fairly high premiums, Mueller added.The slowed pace of bank M&A is also reflected by a June 17 report from Pricewaterhouse Coopers. There were 130 bank-to-bank deals in the first half of this year, according to PwC, down from approximately 190 in the first six months of 2025. The report cited uncertainty amid inflation, monetary policy concerns and geopolitical conflicts as reasons for the lack of activity. Despite the drop in overall volume, megabank deals have driven overall value over the past year to a similar mark from the previous 12 months, PwC noted. Two such deals this year include large Spanish financial institution Banco Santander acquiring Connecticut-based Webster Financial for $12.3 billion. Also, Capital One announced its pending, $5.15 billion acquisition of corporate card and expense management fintech Brex. Despite the slowed activity, median deal closing times have fallen to 132 days from 187 in 2025 amid a friendlier regulatory environment. Federal reviews have become faster, with greater perceived predictability in dealmaking. Looser M&A regulations are important for banks with more than $1 billion as they often have the professional corporate development groups to handle multiple deals in a year, Mueller said. Smaller banks often do not have the internal staff to annually buy a bank. According to PwC, market participants still expect to benefit from consolidation by spreading operational and compliance costs over a larger revenue base. M&A interest continues even as boards are more cautious in decision-making amid inflation, changing expectations surrounding interest rates and broader market volatility. Stablecoins are increasingly competing for transaction balances and payment flows, according to PwC. The accounting firm expects banks to respond by partnering with or acquiring other financial institutions or investing in payments infrastructure, digital asset custody, tokenization or stablecoin-enablement opportunities.