Big Banks Avoid Mergers

Bank mergers were expected to go off the roof due to Trump’s pro-business policies. Instead, they have crashed into a wall.

What followed was a paralyzing market volatility and economic uncertainty with no concrete signs of recovery.

While Treasury Secretary Scott Bessent says mergers are being stalled by only ”minor issues”, the situation could not be messier in reality.

The Trump administration’s attempts to roll-back the Biden-era’s oversights are clashing with existing fears stemming from previous bank failures, leftover regulatory penalties, and immense paper losses parked on the banks’ balance sheets.

Analysts projected a spike in mergers after Trump’s election, but the numbers show a very different story, with large organizations like PNC Financial, U.S. Bancorp, and Truist Financial remaining cautiously pessimistic about jumping into such an unpredictable landscape.

Since March 2022, there have been only nine megadeals greater than $1 billion, while Biden’s first year saw more than a dozen.

The $35 billion merger between Capital One and Discover is still in a limbo because of pending regulatory approval.

Similarly, the failed $13.7 billion acquisition of First Horizon by Toronto-Dominion Bank stands as a cautionary tale; a year-plus-long approval process that ultimately went south.

There’s looming uncertainty in the air, and major banks are inhaling it.

Bank executives are playing one game of waiting after another, in their bid to confront an industry that is still in the clutches of the failures of Silicon Valley Bank and the collapse of First Republic Bank in 2023.

The interim leadership at agencies such as the FDIC and the Office of the Comptroller of the Currency only adds to the confusion.

Two-thirds of large U.S. banks have fallen into the “regulatory penalty box,” by the Federal Reserve because of poor risk management and governance systems.

Amid this, soaring U.S. interest rates have left banks with deep unrealized losses. But if they merge now, those which will turn into realized losses will suck their shareholders dry overnight. It is a no-win situation.

Nevertheless, the clock is ticking.

Trump’s push for deregulation was to liberate Wall Street, but in fact, today’s financial sector looks more uncertain than ever.

Will the banks weather this storm, or will they finally bet big on mega-deals despite the risks?

If soon we don’t see a rebound in mergers, the industry may face deeper fractures, ones that even deregulation would not be able to put to rest.

The issue, however, is whether Wall Street is about to undergo a real shake-up in banking, or whether we’re merely witnessing a slow, steady erosion of the power moves employed by big finance.

There is no doubt that time is running in either case, and that the stakes could not be higher.