Strategic M&A in banking help institutions provide strength, scale and service solutions
Following the biggest deal-making year in fourteen years, bank M&A activity in 2021 resulted in one of the biggest mega-mergers in a decade between BB&T and SunTrust and another dozen deals gave a big boost to regional banking across four corners of the country – the Northeast, the Midwest, the South and the West Coast. All told, 2021 saw dozens of big deals announced, inked or finalized, resulting in increased scale and scope for banks “that will enable them to compete against larger rivals,” according to American Banker.
Even with renewed regulatory scrutiny from a new administration, 2022 is also shaping up to be another banner year for bank M&A, especially for midsize and smaller financial institutions. “Banks are expected to continue to pursue growth through acquisitions into 2022, driven by a desire for increased scale and enhanced franchise strength either through new geographies or by growing market share within their existing footprint,” explains Fintech Ratings analysis. “Moreover, increased scale can alleviate growing technology and compliance costs.”
Just as in other competitive sectors, mergers and acquisitions empower financial institutions to expand their reach and enhance their influence. Once primarily the purview of geography, bank mergers today have institutions leveraging M&A not just for scale, but also for strategic solutions that provide long-term resiliency – from technology to expanded services. Case in point: BNY Mellon’s actions in 2021, pairing up with tech and software companies. According to the company’s CFO in American Banker, “Bank of New York Mellon is open to buying more ‘tuck-in’ technology companies and isn’t ruling out a blockbuster acquisition for assets.”
Other 2021 mergers like the one between City First Bank in Washington, DC and Broadway Financial in Los Angeles are targeted toward underbanked communities. This deal creates the largest Black-owned bank in the country with more than $1 billion in combined assets. A focus on multifamily affordable housing, small businesses and nonprofit development means the bank needs deep investments. “We need to scale up our impact,” says Brian E. Argrett, CEO of City First Bank. “Having a larger capital base is important, so we can direct more resources into underserved communities.”
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