2019 Bank M&A Survey: What’s Driving Growth

Over the past year, Congress has passed both tax reform and regulatory relief—signed into law by President Donald Trump in December 2017 and May 2018, respectively. And the Trump administration has appointed regulators who appear to be more favorable to the industry, including former bankers Joseph Otting, to the Office of the Comptroller of the Currency, and Jelena McWilliams, to the Federal Deposit Insurance Corp.

As a result, the 184 bank executives and directors participating in the 2019 Bank M&A Survey, sponsored by Crowe LLP, voice a resoundingly positive view of Washington, particularly for Trump and Mick Mulvaney. Eighty-seven percent say the Trump administration has had a positive impact on the banking industry. The same percentage give glowing marks to Mulvaney, the interim head of the Consumer Financial Protection Bureau who has turned the agency into less of a regulatory cop and more into a regulator with an even-handed approach toward the financial industry.

The survey examines industry attitudes about issues impacting M&A and growth, along with expected acquisition plans and expectations for the U.S. economy through 2019. It was conducted in September and October 2018.

Tax reform had a big impact on the industry, with many making investments to grow their business. Thirty-seven percent say their bank invested in new growth initiatives as a result of tax reform, and 36 percent in new technology. One-quarter indicate the bank raised employee salaries, and 19 percent paid a one-time bonus to employees. Some shareholders saw gains as well: 25 percent of respondents say their bank paid a dividend, and 10 percent bought back stock.

When asked where the bank designated the largest percentage of its tax windfall, 32 percent point to new growth initiatives, and 26 percent to shareholders.

Additional Findings

• More than half believe the current environment is more favorable for deals, and 50 percent say they’re likely to acquire another bank by the end of 2019.
• Thirty percent believe their bank is more likely to acquire as a result of the Economic Growth, Regulatory Relief and Consumer Protection Act, which rolled back some regulations for the banking industry. Two-thirds indicate regulatory reform will have no impact on their M&A plans.
• Acquiring deposits is very attractive to today’s potential dealmakers: 71 percent say the potential target’s deposit base is a highly important factor in making the decision to acquire. 
• To better compete for deposits, 29 percent say their bank will acquire deposits via acquisition.
• Fifty-three percent say branch locations in attractive or growing markets are highly important, and 49 percent place high value on lending teams or talented lenders at the target.
• Despite more sympathetic regulators and the passage of regulatory relief, 72 percent say their bank’s examiners have grown no less stringent over the past two years.

To view the full results to the survey, click here.