For much of the last two decades, bankers have waited for a recovery in mergers and acquisitions in their own sector. Their hopes have been dashed by regulation, interest rates and economic crises, among other things. But now her wish could come true.
There are about 3,800 commercial banks in the United States, a number that has steadily declined from 12,300 in 1990 but is still much larger than in other rich countries. This year, pressure to merge and leverage economies of scale has increased while regulatory and financial hurdles have been reduced. Around $47 billion in banking deals have been announced so far in 2025, more than double that of 2023 and 2024 combined. And the pace increases: October was the month with the highest trading volume since 2019.
What is the reason for this enthusiasm? Accordingly Gardenera research group, banks and investment firms are expected to increase their technology spending from $760 billion this year to $1.1 trillion in 2029 by modernizing their systems and experimenting with artificial intelligence. JPMorgan Chasethe largest bank in the United States, invested around $18 billion in various technologies this year. “Retail banking follows the same path as any other standard product. It’s about technology, reach and brand,” says the bank’s Richard Ramsden Goldman Sachs. “Those who are larger gain a competitive advantage.”
At the same time, mergers are becoming easier. A sudden rise in interest rates starting in 2022 caused banks to suffer large paper losses on long-term assets, making these institutions less attractive to potential buyers. However, under more favorable conditions, unrealized losses on securities holdings have been halved to $337 billion over the past three years. In November, the Financial Accounting Standards Board (FCSB) introduced a major adjustment to the rules for credit purchases. Banks no longer have to consider the risk of credit default twice when purchasing from another lender.
This is just one part of a broader regulatory revolution. Travis Hill, acting head of the Federal Deposit Insurance Corporation (FDIC), is close to being confirmed as permanent president. If she wins the appointment, the Trump administration would have appointed an entire group of bank-friendly regulators. Capital requirements for large credit institutions are already being relaxed. The analysts from Jefferiesan investment bank, envisions overall looser regulations that it estimates will free up $2.6 trillion in lending capacity, or 16% of total U.S. bank assets, making acquisitions easier.
Some operations in October show Wall Street’s enthusiasm. Fifth Third Bank and Huntington Bancshares, two Ohio-based lenders, invested $10.9 billion and $7.4 billion, respectively, in smaller banks. These are significant sums, but what was most interesting was that each operation increased the institution’s assets to over $250 billion, where regulatory control is becoming tighter. In recent years, banks have remained below the mark and have been able to avoid complications, even if that has meant also having to avoid scale. They are now increasingly confident that regulators will not back them into a corner.
The speed at which transactions are completed is another reason to be excited. UBS banking analyst Nicholas Holowko highlights the $9 billion merger announced in July between Pinnacle Financial Partners And Synovustwo southern banks approved by regulators in less than five and a half months, the fastest approval of their size since the 2007-2009 global financial crisis. According to Mike Mayo, banking analyst at Wells Fargo, this pace is fairly typical of the recent trading boom.
Bank managers focus on economies of scale rather than worrying about potential problems. Could something be affecting your mood? There have been periods of concern this year about the state of U.S. corporate credit. Perhaps more worrisome, however, would be a change in the political temperature. The November 2026 midterm elections will not result in a change in regulators. But they could change the makeup of lawmakers overseeing the sector, including the powerful House Financial Services Committee, signaling that tougher regulation is likely in the future.
CEOs are inevitably evasive when asked about possible mergers. Potential buyers complain that smaller banks are overvalued and are trying to drive down prices. Potential sellers are even more reluctant to come forward, trying to avoid appearing to be in trouble. At the moment each side is playing its role perfectly. But even if Democrats win a landslide in 2026, bankers will have a year until new lawmakers take their seats and three years until a new president can tighten oversight of the sector. Regulatory, financial and technological destinies are aligned. Investment bankers would do well to catch up on sleep over the holidays; Next year could be busy.
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