US Deals Outlook for Banking and Capital Markets in 2023

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mergers and acquisitions

The Federal Reserve has been aggressively raising interest rates in hopes to control inflation causing a double edge sword for financial institutions.  As discussed in the article, “Banking and Capital Markets: US Deals 2023 Outlook”, by Dan Goerlich, for many, this will increase earnings-asset yields and lending margins, but will also raise recessionary fears, forcing the industry to allocate capital with greater discipline. 2022 saw fewer bank mergers as a result of that discipline.

Even so, tactical priorities for making deals remain strong in 2023. We continue to see banks investing in new, disruptive technologies such as big data analytics and artificial intelligence (AI) hoping to transform banks by increasing efficiencies and improving client experiences.

Divesting non-core bank assets to increase capital and to change the focus of the organization is another potential deal driver. For instance, if a financial institution determines that it no longer needs a consumer or commercial financial services business, it might find a willing buyer among capital-rich private equity firms.

In looking back, bank mergers and acquisitions (M&A) activity for 2022 would have been hard to keep pace with 2021.  2021 hit record-breaking numbers due to very favorable conditions for mergers. In contrast, 2022 witnessed significant inflation, rising interest rates, a bear market in bonds and saw a decrease in mergers.


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