President Donald Trump’s return to the White House is largely expected to spur a wide-scale easing of regulation. But how that takes shape in banking mergers and acquisitions remains to be seen.

The first big test concerns Capital One’s proposed $35.3 billion combination with Discover – by far the largest bank deal announced in 2024. Shareholders of each company are set to meet Feb. 18, roughly a year after the deal was disclosed – presumably to gauge the tie-up’s prospects. 

State regulators in Delaware have signed off on the deal, but a green light from federal agencies has been more elusive. The Federal Reserve Bank of Richmond has peppered Capital One with multiple requests for information regarding the deal. 

The companies are doing what they can to make the deal palatable to regulators, announcing a five-year, $265 billion community benefits plan and selling off Discover’s private student-loan portfolio – historically a trouble spot for the lender.

If the Capital One-Discover deal is approved, a greater number of banks may feel comfortable pursuing bigger deals, analysts said.

Not that 2024 was a year of small deals. Six crossed the $1 billion mark: SouthState-Independent ($2 billion), UMB-Heartland (also $2 billion), Atlantic Union-Sandy Spring ($1.6 billion) Old National-Bremer ($1.4 billion), Renasant-The First Bank ($1.2 billion) and Berkshire-Brookline ($1.1 billion). 

Regulators, even before Trump took office, blessed several deals. The Fed gave a green light to the SouthState and UMB acquisitions in December and January, respectively. And the Federal Deposit Insurance Corp. signed off on WesBanco’s $959 million proposed purchase of Premier Financial Corp.

Across a spectrum of sizes, though, M&A activity among banks is expected to increase, analysts predict. 

Regional banks may be driven by growth objectives, technology acquisition or geographic expansion, some said. Community banks with less than $10 billion in assets will most likely see integration between similar-sized institutions or may pursue small deals but stay under regulatory thresholds. 

Regulatory easing?

Those thresholds are key. The specter of a once-seemingly imminent Basel III capital requirements upgrade has dissipated. But other groundwork – specifically, tiered regulation – remains.

“I think if some of the burden on the tiered regulation is eased – meaning $100 billion in assets is an artificial line that's been drawn – if that gets eased, or if there's less fear about growing over, you could see banks that are approaching $100 billion consider crossing,” Christopher McGratty, managing director and head of U.S. bank research at Keefe, Bruyette & Woods, said in an interview. “You could also see banks that are above $100 billion dipping down and acquiring banks of size, if the regulatory expectation isn't as severe.”

Peter Dugas, executive director at Capco, said he expects the Biden-era FDIC M&A guidance to be rescinded, along with a new approach from the Department of Justice on M&A approvals and the elimination of Basel III endgame capital requirements since it inhibits larger banks from pursuing M&A deals. These will be influenced, though, by who is nominated to lead the regulatory agencies, he said. 

But eased regulation, if it happens, won’t be a free-for-all.

“Even under a Trump administration … there's going to be an expectation that a bank would be able to effectively manage that growth,” Dugas said.

Executives at banks as large as PNC have served as skeptics.

“I think people are a little bit too excited … that they’re just going to let everybody run free here,” PNC CEO Bill Demchak said at a conference in December. “I don’t see that at all.” 

Deal volume, timelines and de novos

The three major bank failures of 2023 surely weighed on the M&A environment through the early part of last year. Deal volume across financial services companies rose fairly consistently, though the value of deals may have wobbled from quarter to quarter, according to a study released by KPMG. On a year-over-year basis, deal value jumped 55.7% in the first three quarters of 2024, compared with that period a year earlier, KPMG found. 

Perhaps even more watched is the timeline for regulatory approval of M&A. During the Biden administration, deals took about nine months to close — 40% longer than in Trump’s first term, McGratty said.

FDIC Acting Chair Travis Hill listed, among his priorities, ensuring that mergers are approved in a “timely way.” 

Hill also prioritized encouraging more de novo activity so the space has robust new entrants. Analysts said deregulation could ease the path for de novos, after several years with few newly minted banks.

Colin Walsh, CEO of Varo Bank, said he believes more de novo activity will benefit the industry and consumers. Varo’s banking license showed that new entrants could meet rigorous regulatory standards and bring innovation to the space, he said.

But Walsh emphasized the importance of a stringent application process.

“The charter application process should be rigorous -- it ensures banks are built on solid foundations,” Walsh said in an email. “Our experience has proven that detailed preparation builds stronger institutions that can withstand various challenges such as a pandemic, inflation, the Silicon Valley Bank crisis, and other macro-economic scenarios.”

AI, crypto and outside capital

Walsh tagged 2025 as “the year of AI,” adding that he expects to see bank M&A that fills gaps in tech offerings. The focus, though, “should be on deals that also enhance customer value while maintaining strong risk management practices,” he said.

Artificial intelligence is like a “baseline” that banks will implement for back-end operations, customer-facing tools like chatbots and digital banking services, said James Stevens, a partner at Troutman Pepper Locke.

Technology is becoming increasingly important in determining whether a bank becomes an acquirer or acquisition target, Stevens said. Tech-advanced banks are better positioned to acquire less tech-savvy institutions, while banks with limited tech capacity – usually smaller institutions with limited budgets – will more likely merge into tech-providing partners, he said.

Dugas viewed the lack of a clear regulatory framework with respect to cryptocurrency as a major reason for banks’ caution when engaging with the sector. That may change with the Securities and Exchange Commission’s launch of a crypto task force in January.  

Key changes in deal structure, such as when banks raise outside capital as part of a transaction, have assuaged investors, with buyer bank stocks performing better over the past six to nine months, McGratty said. 

“The deal stocks are acting better, at least in the mid-cap M&A,” McGratty said. “Now, if that can translate to larger banks having decent stock performance, I think that will encourage more banks to get off the sidelines and do deals.”

Fintechs, credit unions and risks

Robert Tammero, a partner at K&L Gates, said he thinks that smaller banks need to consider partnering or acquiring fintechs to remain strong and viable in the financial field. Since fintechs can benefit from stable, low-cost funding from banks, the partnership trend has shifted from competition to collaboration, he said.

“I think that you are likely to see more banks considering buying fintech companies and fintech companies buying banks,” Tammero said. “These relationships are symbiotic and are important for the health of the banking industry going forward.” 

Credit unions, too, have become a more substantial player in bank M&A in recent years. The space saw a record 22 whole-bank acquisitions proposed by credit unions in 2024. This year has not started off as bullish, with just one announcement in 2025’s first month. But such deals will continue to be an option, especially for smaller community banks.

Dugas said merging banks must scrutinize funding and lending operations of acquisition targets and evaluate geopolitical exposure more than in the past. Further, potential tariffs on Canada, Mexico and other countries could impact M&A activity. 

One of the key drivers in bank M&A is commercial real estate portfolio health, Dugas said. Banks broadly are targeting acquisitions in states with stronger office occupancy rates such as Florida, Texas, and North and South Carolina, while avoiding those with struggling CRE markets such as New York, Illinois and California.