Will the Banking Industry Be the Next Hotbed for Shareholder Activism?

The most favorable regulatory environment for bank M&A in decades has sparked heightened attention on a related topic: The role and influence of shareholder activists on publicly traded banking institutions. These activists often have the experience, sophistication and wherewithal to analyze all aspects of a bank’s business operations, financials and governance, and are building a track record of persuading banks to effect substantive change. 

Consequently, bank boards and management teams should be vigilant in assessing their vulnerability to these pure-play bank activists, as well as new entrants that may be drawn to the sector by these activists’ successes. 

The Pure-Play Bank Activist Playbook
Shareholder activists such as HoldCo Asset Management and PL Capital have capitalized on the current M&A cycle. HoldCo initiated five public campaigns against banks in 2025 alone, in each case ultimately choosing not to launch a proxy contest, saying that management agreed to many of its key demands. HoldCo also claims it has ongoing behind-the-scenes “soft activism” engagements at a handful of other banks. HoldCo discussed these campaigns in a presentation it made public ahead of presenting at the UBS Financial Services Conference in February, including its campaign pressing Comerica for a sale. Within months of Holdco’s first public letter calling for a sale, Comerica announced it would be acquired by Fifth Third Bancorp in a transaction initially valued at $10.9 billion.  

The presentation received extensive media coverage, not only because it put other banks on notice that they potentially could find themselves targeted with similar demands but because HoldCo revealed its playbook, which includes: 

• Issuing detailed presentations outlining its case for change, and 
• Pressing management to consider strategic changes, including: 
  • Declaring a moratorium on transformative M&A until the business is improved (although at Comerica, HoldCo believed it was ripe for a sale).
  • Deploying excess capital to repurchase shares. 
  • Declaring target capital ratios.  
  • Swearing off securities restructurings. 

Board Tenure Remains a Focus for All Activists
While governance issues, such as long director tenures, are rarely the initial driver of activist interest, they can become easy talking points for activists demanding strategic and board changes, and banks could be vulnerable. Based on data from FactSet, directors of publicly traded U.S. banking institutions have an average board tenure of 10.6 years, compared to 8.5 years for directors at U.S. public companies overall. As such, bank boards may wish to consider a more proactive approach to refreshment to avoid the risk of greater board change after an activist surfaces. 

What Could Lead to New Entrants
The Bank Holding Company Act of 1956 and the Change in Bank Control Act have historically dissuaded many activists from targeting banks. That’s because those laws impose filing requirements and other regulatory constraints on investors if they exceed certain ownership thresholds or take action constituting “control” of a particular banking institution. 

However, activists that focus on banks have generally kept their ownership below 5% and sought less than a majority of the board when nominating directors, presumably to avoid these restrictions. In addition, revised control rules by the Federal Reserve from 2020 have clarified the extent of activities and rights that can be obtained without triggering a presumption of control. As such, we may begin to see new activists target banks, undeterred by this regulatory regime, given the relative success of more experienced activists without significant ownership stakes. 

How Banks Can Prepare
All public companies should be implementing activism preparedness programs, which includes maintaining a robust stock watch program, conducting proactive engagement with large shareholders, preparing a so-called break-glass communications plan and assessing board composition and governance. 

However, banks should also consider assessing the strategic demands activists are likely to push for by asking the following:

• Does it make sense to explore a sale as bank valuations rise, or pursue an acquisition to maintain scale and relevance amid bank consolidation?
• Would it make more sense to focus on organic growth, growing capital and tangible book value levels, as well as boosting earnings?
• Does the market undervalue the bank relative to its earnings potential, capital levels and deposit base?
• Are target capital ratios in line with those of its peers, or could they be improved?
• Would a share buyback be prudent and well received by investors?
• Could any recent or ongoing securities restructurings be construed as window-dressing or otherwise be subject to criticism?