Post-Crisis Plunge in U.S. Bank Deals Seen Ending: Chart of the Day

The dearth of dealmaking among U.S. banks that followed the 2008 financial crisis is about to end, according to Gerard Cassidy, an analyst at RBC Capital Markets.

The CHART OF THE DAY shows the number of bank-industry mergers and acquisitions each year since 1990, as compiled by SNL Financial LC and cited today in an RBC report. There have been 120 this year, just above last year’s total of 119, the lowest in more than two decades.

Bank mergers will rebound next year, partly because the industry faces “a triple whammy” on revenue, Cassidy wrote in the report. Fee income will drop because of changes in financial regulation, lending will either hold steady or decline, and the Federal Reserve’s push to reduce borrowing costs will cut into net interest margins, a profitability gauge, he wrote.

“Many banks will choose to sell out rather than deal with the complicated web of regulations” resulting from legislation such as the Dodd-Frank financial overhaul, he added. The costs of complying with industry rules may be four to five times as high as they were a decade ago, in his estimation.

At the same time, having a “regulatory road map” in place will help clear the way for dealmaking, according to Cassidy. He added that many lenders have capital available for acquisitions and government-assisted takeovers of failed institutions have become less attractive.

Analysts John G. Arfstrom, Jason Arnold, Joe Morford and Jake Civiello contributed to the report.

(To save a copy of the chart, click here.)

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

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