2023 banking and capital markets M&A outlook: Volatility seeds opportunity

A snapshot of banking and capital markets M&A in 2022

Banking was hardest hit among the three sectors of banking and capital markets (B&CM) last year. While US volume and values exceeded 2020’s pandemic lows, the number of transactions and overall deal value fell off substantially from the soaring 2021 market. Excluding 2020, banking M&A volume in 2022 slumped to its lowest level in six years. Total 2022 volume fell to 167 closed transactions totaling $22.6 billion, compared with 205 closed deals totaling $76.6 billion the previous year—drops of 18.5% and 70.5% in aggregate deal volume and value, respectively. Significantly, average deal value fell nearly in half from $716 million in 2021 to $348 million in 2022, a 51.4% decrease.

With two notable exceptions, the largest bank M&A transactions also shrank in value considerably. Toronto-Dominion Bank (TD) purchased First Horizon Corp. for $13.7 billion, and Royal Bank of Canada bought Hong Kong and Shanghai Banking Corp.’s (HSBC) Canadian operations for $13.5 billion. Both deals continue the reemergence of super-regional and regional banking M&A. The next-largest deal, Provident Financial Services, Inc.’s purchase of Lakeland Bancorp, Inc., was for $1.3 billion.

Most megadeals closed in 2022 had been announced in 2021 but underwent regulatory scrutiny that in some cases stretched more than 14 months. U.S. Bancorp’s acquisition of MUFG Union Bank, N.A. from Mitsubishi UFG Financial Group for nearly $8 billion, announced in September 2021, closed in December 2022. New York Community Bancorp, Inc., which struck a deal for Flagstar Bancorp, Inc. for $2.6 billion in April 2021, finally closed the transaction in December 2022—a total of nearly 19 months.

Read the full review of 2022 across banking, fintech, and investment management (IM) and wealth management (WM) by downloading the 2023 banking and capital markets M&A outlook.

2023 banking and capital markets M&A trends and drivers

The following banking M&A trends and drivers are worth watching for their potential impact on headwinds or tailwinds during the coming year. Download the full 2023 banking and capital markets M&A outlook to explore all the critical insights.

Capitalize on B&CM opportunities in the year ahead

While B&CM likely will remain constrained in 2023, firms also need to prepare for better times ahead. The US economic recovery following the 2007 to 2009 recession proved much longer and stronger than the downturn had been. One of the challenges for executives this year will be to manage the current economic slowdown while positioning their businesses to thrive in the future.

B&CM winners will recognize that M&A has entered a very different world, with lowered valuations and evolving ownership models. The most successful companies will likely be thoughtful buyers and sellers prepared to initiate bold, proactive moves. In a year when companies need to make choices, the most successful companies will most likely be those that recognize 2023 is not a time for inactivity.

If you’d like to talk more about banking mergers and acquisitions activity and how your organization can thrive in 2023, let’s set up a conversation. And visit our Banking & Capital Markets industry page for broader industry insights, analysis, and resources.