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Bank M&A makes sense – except to the owners

If everyone else is keen on consolidation, why aren’t shareholders?


Banking is different. Any normal industry stuck between weak revenues (banks have been hit by negative interest rates and subdued loan demand) and rising costs (complying with all those new regulations, overhauling legacy IT systems and building new digital capabilities) would be consolidating like crazy by now.  Scale is the answer. 

But the provision of financial services is fragmenting as new fintechs and other challenger banks continue to appear. 

The nominal annual value of global M&A across all industry sectors peaked in 2007 at $4.5 trillion and then ran at half that level from 2009 to 2013 before recovering to its former peak in 2015 –albeit still below the 2007 level as a percentage of global GDP. But banking missed the invite to this party. 

Global banking M&A values peaked in 2007 at $300 billion, with cross-border deals counting for more than half that. In 2017, banking M&A deals amounted to just $45 billion, according to Dealogic, with most of those being purely domestic transactions.

Even in-market deals are few and small. Germany still has 1,643 banks and credit institutions.

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