The Capital Markets Are Wide Open for Banks, Industry Observers Say

The credit markets are open to banks needing capital for key strategic initiatives.

Some banks may have previously paused plans to raise capital given market volatility and economic uncertainty earlier this year. The KBW Nasdaq bank index fell to a low in April but has since recovered and is up about 20% for the year.

“The capital markets are wide open,” said Brian Leibfried of Performance Trust Capital Advisors during a presentation at Bank Director’s Bank Board Forum on Monday in Marco Island, Florida. “As a board member, you need to be demanding a conversation around this with your management team.”

This has been especially true for institutions looking to raise funds in conjunction with an acquisition. In 2024 and 2025, there were nine deals that raised $2 billion in public equity, according to a presentation by Stephens during the conference. The Bank Board Forum runs through Wednesday and covers a range of issues, such as governance, compensation, M&A and risk management.

“We have seen for the first time in a long time, capital being raised concurrently with the M&A deal,” says Frank Sorrentino, a managing director at Stephens. “We haven’t really seen this since … the 2018 timeframe by our tracking.”

Of the banks that have announced capital raises, their stocks have “reacted very, very well,” Sorrentino noted. For instance, Kansas City, Missouri-based UMB Financial Corp. closed its roughly $2 billion all-stock deal to buy Denver, Colorado-based Heartland Financial USA in January 2025. It raised $242 million as part of the deal, according to Stephens. Since the end of April 2024, when that offering was priced, UMB’s stock price has risen by roughly 50%. “You are going to see more of this for sure,” Sorrentino said of banks looking to raise capital to complete a deal.

That prediction comes as M&A has picked up this year. So far, 101 deals have been announced through Aug. 6, according to Leibfried’s presentation. That’s on track to be the best year since 2021, given his prediction that there will be 170 deals in 2025 on an annualized basis. Last year, there were 126 announced deals and in 2023, there were 96, according to S&P Global Market Intelligence.

Still, banks need a reason for their capital raise, said Dan Flaherty, managing director of the financial institutions group at Janney Montgomery Scott. “They want something behind it. The markets aren’t so open just yet where we can go out and just raise capital for raising capital’s sake, like we did in ‘16, ‘17 and ‘18.”

Specifically, investors are also looking for how the capital raise will boost the bank’s profitability. For instance, when money has been raised in connection with an acquisition, the deal would boost the acquirer’s bottom line, as opposed to being needed to fix the seller’s credit quality. Or banks have raised money to sell underwater securities in their portfolios. Though there may be an immediate hit, the banks have been able to demonstrate how the move will improve earnings the following year. Investors prefer these types of scenarios for capital raises.

In contrast, it’s difficult to ask “investors to fill a hole,” Flaherty said. This even goes for technology, which can be essential for banks to invest in. Banks are better served by paying for these projects through organic capital accretion, rather than going to the capital markets. “I mean community banks, smaller banks definitely are always trying to play catch up on [technology],” he adds. “It’s not very exciting to raise $20 million and allocate [$5 million] of it to new software.”

Right now, with much optimism in the industry, banks may have no shortage of strategic initiatives that they may want to pursue. Flaherty noted that banks over the last few years have been waiting for a number of events, such as the liquidity crisis in the spring 2023 to subside and interest rates to normalize or even decline. Now that the industry is past that, and credit quality remains strong, he encouraged banks to be ready to seize any opportunities since “windows come and go.”
“I would encourage you to go back to your board and tell them that you heard things like this because I think it’s a good time to do things,” Flaherty added during a panel discussing strategic capital considerations during the Bank Board Forum. “I think first movers always do the best.”

“I think in 2026, banks will flip from defense to offense,” he added. “I think you can really add a lot of value to your franchise over the next couple of years.”