Renewal in Banking M&A Expected as Economic Pressures Moderate

Banks are in a better position to take on strategic growth through mergers and acquisitions as they welcome a better rate and regulatory environment

While mergers and acquisitions in banking slowed considerably in 2022 compared to their high-water mark in 2021, current conditions point to renewed activity in 2023 – as regulatory prospects improve, the financing and rate environment stabilizes, and institutions acclimate to new economic realities. “Many companies adapted, structuring deals to sidestep market volatility and minimize financing costs,” according to the Wall Street Journal’s merger analysis. “The M&A market is not going to stop,” says Christopher Auld, head of leveraged finance at investment firm Stifel Financial in an interview with WSJ. “It just doesn’t work that way. What it does is it evolves.”

One major indication that change is afoot is the approval of what had been a hotly contested North American acquisition at the end of 2022. Canadian banking leader Bank of Montreal (BMO) has now received the green light from both the Federal Reserve and the Office of the Comptroller of Currency for its purchase of Bank of the West, a deal that is expected to be quickly finalized by February 1, 2023. Ultimately, the approval was thanks in large part to BMO’s commitment to a community benefits plan, serving lower-income and minority homeowners and “aimed at boosting the bank’s lending in underserved markets,” according to American Banker’s reporting on the deal.

Even with the overall slowdown in banking in 2021, the year’s biggest deals came in during the second half of the year, showing a Q3-Q4 surge. In addition to the just approved BMO-Bank of the West merger, another massive agreement now slated for 2023 is the pending acquisition by Canada’s Toronto-Dominion Bank (TD Bank) of Tennessee-based First Horizon Corporation. This all-cash deal was the largest bank merger announced in 2022 and “the fifth-largest U.S. bank M&A transaction in the last 15 years,” according to S&P Global Intelligence reporting on the mergers. This move is part of a cross-border trend toward expanding a North American banking footprint on both sides of the border.

In addition to big mergers that get much of the industry ink, smaller community institutions continue a slow and steady approach to growth with deals that comprised a surprisingly large percentage of M&A in 2021. “Amongst all completed commercial bank mergers, nearly nine out of ten of them are between community banking organizations (CBOs),” finds Believe in Banking reporting in early 2022. One rising M&A trend is among CUs. “Credit unions ended 2022 with a spurt of bank deal activity,” according to S&P Global Intelligence reporting on credit union growth. “And deal advisers expect the momentum to continue in 2023.” Whether among community banks or credit unions, M&A at the community level results in larger and healthier FIs with more resources to serve.

For the latest M&A data, news and perspectives, stay tuned to Believe in Banking’s continuing coverage of top trends and topics. For the banking industry’s best practices and perspectives, like how banks are scaling for growth, visit Adrenaline’s Insights. And if you’re a banking leader looking for brand to branch strategies customized for your institution, contact our banking and credit union experts via email at