Mergers and acquisitions among UK and European banks are set to increase in the coming year as they come under pressure from a combination of lower interest rates, government actions and financial sponsors looking for a way out.
Banks will also look to cut headcount and local branches as they bulk up their balance sheets and trim excess costs to try and shore up their profits, according to law firm White & Case’s latest UK & European Financial Services M&A report.
"We are more bullish on bank M&A than we have been in the last five years," said Hyder Jumabhoy, partner at White & Case. "As [a] lower net interest margin environment looms, UK and European lenders which had [previously] shelved transformational deals will need to act quickly, albeit carefully."
The industry has already seen considerable M&A in the past 18 months, with more than 35 domestic bank consolidations in the UK and euro area in the past 12 months, according to the report, not including those related to the war between Russia and Ukraine.
This has been particularly acute in the UK, which has seen a number of challenger banks being swallowed up by bigger rivals. Jumabhoy expects this to continue as these challengers come under pressure from financial sponsors who have "remained patient" over the past five years. These sponsors will be pushing for exits, or "transformational transactions", he added.
The full article can be found here (paywall).
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