Uncertainty surrounding COVID-19's impact on the economy has led to a pause in U.S. bank M&A that could continue for months or the rest of the year, analysts and deal advisers said.

Credit quality concerns and a shifted focus to internal operations as the novel coronavirus spreads have contributed to the decline in deal volume. Once COVID-19's full economic impact is understood, M&A could pick back up, but future uncertainty regarding the upcoming presidential election could cause M&A to be down for the rest of 2020, one expert said.

Following the lowest volume of deals in more than three years in February, only nine whole-bank deals were announced in March. All but two of those deals were announced before March 15. During the first quarter, 39 whole-bank deals were announced, 20 of which were announced in January. This is down from 48 whole-bank deals announced during the first quarter of 2019.

Credit quality concerns are the main driver for the pause in deals, according to James Stevens, partner with Troutman Sanders LLP. "We've seen the virus and now the virus has produced this impact on the economy, but what we haven't seen yet is what is the impact on credit quality for banks," Stevens said in an interview.

That uncertainty has caused would-be buyers and sellers to pause on M&A while they figure out what the ultimate impact of the novel coronavirus will be, Stevens said.

"You can envision that M&A will be slow for a while ... because companies have to get their hands around what they have," Christopher Marinac, director of research at Janney Montgomery Scott LLC, said in an interview.

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Still, acquisitions might have their advantages. One expert said deal announcements would not surprise him because banks could find transactions with fixed cost-savings "attractive" in this environment. "If there is a good deal to be had, I don't think they will let this stand in the way of getting a transaction done," Craig Miller, partner with Manatt Phelps & Phillips LLP, said in an interview.

But other experts said banks will focus on internal operations, like monitoring credit quality, instead of M&A.

"Just the litany of issues that banks around the country are forced to deal with. There isn't the time to deal with an M&A transaction on top of that," said Robert Klingler, partner with Bryan Cave Leighton Paisner.

But once banks begin to understand the economic impacts of COVID-19, prior deal conversations will reconvene and M&A will pick back up, according to Stevens.

"There's no question that the industry will go through another big round of consolidation after this COVID-19 mess is absorbed or at least better understood," Marinac said. "We will get confidence back in this business, which is going to enable M&A, but I don't think it will happen for several months."

But Klingler thinks the M&A pause could last the remainder of the year. While deal conversations will start back up again once the economy starts to recover, uncertainty from the upcoming presidential election will soon follow, according to Klingler.

"I think we're now looking at a depressed M&A market for banks for the rest of the year," he said.

Not only is the virus impacting deal volume, it has also caused pending deals to be delayed or terminated. Credit quality concerns that have caused the halt in M&A will also impact pending deals, according to Marinac.

"Doing credit due diligence is going to be a lot more intense and risky based on the change because now everybody's credit quality is in question," Marinac said. "That whole schematic has to start over if you are in the middle of buying a bank."