Bank Director's 2025 Bank M&A Survey: A Cautiously Optimistic Outlook

Senior bank executives and board members anticipate a potential rebound in M&A activity.

NASHVILLE, Tenn., Nov. 19, 2024 /PRNewswire/ -- Today, Bank Director, the leading information resource for directors and officers of financial institutions nationwide, released the results of its 2025 Bank M&A Survey. As the banking industry navigates a complex landscape of rising interest rates and regulatory challenges, a sense of optimism is emerging regarding future M&A activity. Bank Director's 2025 Bank M&A Survey, sponsored by Crowe LLP, reveals that bank leaders are increasingly open to strategic acquisitions to drive growth and enhance their competitive position.

"The general sentiment in the industry is that M&A is back on the table," says Patrick Vernon, a strategy and transaction advisory senior manager at Crowe. "Banks have been actively restructuring their balance sheets, which has improved valuations and created opportunities for strategic deals."

More than a third of respondents believe between 100 and 150 in a calendar year would be appropriate for the industry, while 29% put it at fewer than 100. "Until fairly recently, it was not unusual to see 200 or more deals in a year," says Kevin Brand, strategy and transaction advisory partner at Crowe. He adds that factors like pricing, regulatory approvals and post-merger integration efforts have forced banks to be more strategic about which deals make the most sense.

Yet despite the growing optimism, deposit costs continue to challenge bank profitability, according to 72% of respondents. Fortunately, that percentage should improve if the Federal Reserve continues to cut interest rates. The Bank M&A survey was fielded in September 2024, with most respondents taking part before the Federal Open Market Committee moved to cut rates by 50 basis points later that month; 60% expect lower core deposit costs in such a scenario.

"Anecdotally, bankers are factoring further cuts in interest rates into their expectations for 2025, which should relieve pressures on deposit costs," says Emily McCormick, vice president of editorial & research at Bank Director. "However, uncertainty lingers as loan portfolios reprice, raising concerns about credit quality and potential impacts on bank earnings."

Bank M&A Survey Key Findings:

• Increased Appetite for M&A: Forty-three percent of bank leaders are very or somewhat likely to acquire another bank by the end of 2025, up from 35% in the previous year.
• Strategic Drivers: Scale to drive technology investments and geographic expansion are the top factors driving acquisition strategies.
• Improved Valuations: A majority (55%) of publicly traded bank executives believe their stock is attractive enough to pursue acquisitions, reflecting a more favorable valuation environment.
• Regulatory Challenges: While M&A activity is poised for a rebound, regulatory compliance costs and the increased compliance burden remain significant obstacles to profitability and organic growth.
• Cautious Optimism: Despite these challenges, bank leaders are cautiously optimistic about the future, with many expecting lower core deposit costs as the Fed eases interest rates.

Bank Director's 2025 Bank M&A Survey provides valuable insights into the evolving landscape of bank M&A, organic growth and profitability. To view the full report and additional findings, please visit Bank Director.com.

About Bank Director
Bank Director reaches the leaders of the institutions that comprise America's banking industry. Since 1991, Bank Director has provided board-level research, peer insights and in-depth executive and board services. Built for banks, Bank Director extends into and beyond the boardroom by providing timely and relevant information through Bank Director magazine, board training services and the financial industry's premier event, Acquire or Be Acquired. For more information, please visit BankDirector.com.

About Crowe LLP
Crowe LLP is a public accounting and consulting firm that uses its deep industry expertise to provide audit, tax, and consulting services to public and private entities. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world. Its banking industry focused team of more than 1,200 professionals has more than 50 years of experience, works with financial institutions of all sizes and serves more than 2,700 financial services organizations. For more information, please visit www.crowe.com/banking

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For more information, please contact Bank Director's Director of Marketing, Deahna Welcher at [email protected].

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SOURCE Bank Director