Mergers and acquisitions in 2026 could further widen the gap between large and smaller banks

Bank Mergers and Acquisitions: What to Expect in 2026

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Surge in Deal Activity Expected

While 2025 focused on creating favorable conditions for bank mergers, 2026 is shaping up to be a year of heightened activity as institutions rush to capitalize on the current environment.

Industry experts predict that continued consolidation will reshape the banking sector, creating a “barbell” effect: mid-sized and regional banks will grow larger through acquisitions, while numerous smaller banks—especially those with assets under $1 billion—will remain on the opposite end of the spectrum.

According to S&P Global Market Intelligence, 2025 saw 181 bank merger announcements, the highest since 2021. The second half of the year alone accounted for 105 deals, up from 63 in the latter half of 2024.

Regulatory Changes Fueling M&A

Brian Graham, co-founder and partner at Klaros Group, notes that the likelihood of regulatory approval for mergers has increased significantly, making such deals more appealing. He also highlights that the approval process has become much faster—decisions now take just three to four months, compared to up to two years previously—reducing the risk for potential buyers.

UBS analyst Nicholas Holowko points to streamlined approval timelines, updated supervisory frameworks, and rising asset thresholds as factors that will further encourage mergers and acquisitions in 2026 and beyond.

Market Forces and Competitive Pressures

Rising bank stock prices and anticipated interest rate cuts are contributing to a favorable climate for deals. At the same time, succession planning and escalating technology expenses are putting pressure on smaller banks, while larger institutions seek greater scale.

Traditional banking models are also facing new challenges. Graham observes that the increasing popularity of digital banks is beginning to impact the industry in meaningful ways.

Analysts suggest that the number of deals in 2026 could double compared to 2025, as banks move quickly to take advantage of the current window—especially with upcoming midterm and presidential elections that could shift the regulatory landscape.

States with a high concentration of banks, such as Texas, Illinois, Ohio, Minnesota, and Pennsylvania, are expected to see ongoing consolidation, particularly among banks with assets between $10 billion and $100 billion.

Shifting Dynamics Among Buyers and Sellers

Larger and even some of the biggest banks now see opportunities to pursue acquisitions that were previously off the table. For example, Wells Fargo CEO Charlie Scharf recently stated that while the bank feels no immediate pressure to make a deal, it is considering mergers due to regulators’ openness to larger transactions.

Who’s Buying and Who’s Selling?

Analysts anticipate that more banks currently on the sidelines will enter the market as buyers this year. Tom Hayes of D.A. Davidson notes that among larger regional banks, there is a widespread sense that “everyone is a potential buyer,” though these institutions are less interested in acquiring very small banks as they grow.

Consolidation has changed the landscape, with some frequent acquirers like Cadence Bank stepping back, prompting smaller banks to reconsider their own strategies. Kirk Hovde of Hovde Group explains that as larger banks consolidate, smaller banks may feel pressure to act before their pool of potential buyers shrinks further.

The market for banks with under $1 billion in assets is particularly affected. If there aren’t enough buyers, more small banks may opt to merge. Credit unions have also become more active in acquiring small banks, a trend expected to continue.

Faster regulatory approvals and openness to nonbank buyers are attracting fintech firms and investment groups to the market, according to Joe Silvia of Duane Morris.

The roles of buyers and sellers are constantly evolving. Patrick Hanchey of Alston & Bird observes that banks sometimes switch from buyer to seller within months, as unexpected opportunities arise.

Factors Driving and Hindering M&A

More banks may consider selling as they evaluate their financial health, technology capabilities, and long-term prospects. Joe Silvia notes that rapid advancements in fintech and digital assets are forcing smaller institutions to decide whether to invest in innovation or consider selling.

Stablecoins and other digital assets are also prompting more merger discussions, according to Patrick Hanchey.

Proposed changes to asset thresholds by regulators and lawmakers may encourage more “mergers of equals,” allowing banks to double in size without entering a new regulatory category.

Activist investors are also influencing the market. For example, HoldCo Asset Management pushed Comerica to sell itself—a move that was completed—and urged KeyBank to avoid acquisitions. HoldCo’s Vik Ghei believes that management teams will need to justify acquisitions more rigorously, which could reduce the number of deals.

While such activist interventions are still rare, their presence may make some buyers more cautious, says Tom Hayes.

Industry Outlook

Although a wave of mergers could reduce the total number of banks, many industry leaders see advantages in having a larger pool of sizable lenders. Brian Graham suggests that doubling the number of major banks would be beneficial for the sector.

Marianne Lake, CEO of JPMorgan Chase’s consumer and community banking division, believes that a more robust M&A environment strengthens the industry. As more companies expand their capabilities and scale, competition will intensify, ultimately benefiting consumers and the market as a whole.