A wave of bank mergers, long anticipated, seems to be gaining momentum as regulatory conditions under the Trump administration become more favorable for such transactions. The outlook for regional bank mergers has notably improved in recent months, with market analysts tracking this trend closely.
On Wednesday, there was a significant indication that regulatory pushback—particularly from the Trump administration—on such deals is minimal. For instance, Colombia’s banking sector and Pacific Prime Bank, which recently announced their merger into a $70 billion entity, received all necessary approvals and expect to finalize their agreement by the end of August.
Market analysts remain optimistic about bank mergers, downplaying any negative reactions from investors regarding what might be the biggest deal of the year. This merger stands out among others, like those proposed between Pinnacle Financial Partners and Synovus Financial, which can be a bit more tumultuous than simpler acquisitions. Jeffreys analyst David Chiavellini pointed out that in the case of Pinnacle and Synovus, their valuations already included premiums before the merger was announced.
“It’s a unique case since both entities were also considered acquisition targets,” Chiavelini noted in his comments to Bank of America. He went on to highlight elements that have made bank mergers and acquisitions (M&A) more appealing, such as rising stock prices and a decrease in unrealized losses on bank balance sheets. Interestingly, he mentioned that regional banks are increasingly aware of the benefits that come with size.
“I think that’s what’s driving them,” he suggested.
In a report published this week, Chiavellini and his Jeffreys colleagues painted a scenario in which certain regional banks might opt to sell themselves. There are several reasons a bank might consider selling—from lackluster financial performance to alignment with a more suitable merger partner.
As KPMG’s Henry Lacey put it, “There’s an old saying that banks aren’t sold; they’re bought.” Below, we explore five regional banks identified by Jeffreys analysts as likely candidates for selling.
Comerica
Comerica has recently come under the spotlight as an acquisition target, particularly highlighted by activist group Holdco Asset Management. This Dallas-based bank, which is valued at $77.6 billion, is under pressure to consider a sale, especially since Holdco, owning about 1.8% of its shares, accused the bank of poor financial management and neglecting its stock performance.
In its counter, Comerica asserted that it is focused on maximizing shareholder value, continuing to pursue its strategic objectives. Yet, after Holdco’s critique, Chiavelini observed that “the pressure is on in the boardroom.”
Holdco has pinpointed three potential buyers for Comerica. Analysts at Jefferies echoed this list, naming PNC Financial Services Group, Fifth Third Bancorp, and Huntington Bancshares. They further noted that estimated cost savings could reach up to 35% for a PNC acquisition, with slightly lower projections for the others.
First Horizon
First Horizon previously agreed to be acquired by TD Bank Group back in 2022 but is now valued at $13 billion—still working as an independent entity in Memphis, Tennessee. Jefferies analysts have remarked that while the bank’s stock has seen some recovery since the TD deal’s collapse, it remains below the original offer price.
However, Chiavellini suggested that First Horizon isn’t in dire straits. The bank, located in an attractive market, poses an enticing opportunity for buyers. Potential candidates might include Fifth Third, Huntington, Truist Financial, or other Canadian banks facing US growth restrictions.
Flagstar Financial
Flagstar Financial also finds itself as a potential acquisition target, especially since being saved by a private equity group earlier this year. Although the bank plans to regain profitability by year-end, Jefferies analysts indicated that its performance in profit and valuation hasn’t been stellar.
CEO Joseph Otting has even hinted at the possibility of a sale. “We could become an attractive target,” he mentioned back in February. Jefferies analysts have sketched out two potential outcomes—one involving a traditional sale to First Citizens Bancshares and another suggesting a merger with Valley National Bancorp.
Bank of California
California’s Banc, with assets soaring to $34.3 billion following its acquisition of PacWest Bancorp, is another bank attracting attention. Even though Banc of California has successfully integrated PacWest, it faces challenges and may catch the eye of larger agencies seeking expansion on the West Coast.
Chiavellini noted that California’s asset size positions it well in the M&A landscape, making it attractive for both smaller buyers and larger regional banks. He speculated that it could potentially be bought by KeyCorp from Cleveland or Columbia Bank from Washington.
Cathay Bank
Cathay Bancorp has made the Jeffreys analysts’ list due to its strong presence in Southern California and focus on the Asian American community. Geographically, it shares similar footprints with East West Bancorp, another potential buyer. Analysts estimate that such a merger could result in significant cost savings—around 35%.
Chiavellini remarked, “Cathay has a solid cultural fit with East West, which could make this a strategic move.”
