Mergers and acquisitions deals in the global banking sector hit the lowest level for at least five years in 2023, a year marked by high-profile bank failures and high interest rates.
The deal count, which includes whole bank deals, asset sales and minority investments, fell 32.6% year over year to 291, according to S&P Global Market Intelligence data.
The steepest decline was in North America, where deals totaled 117, 42.1% fewer than the previous year. The year saw three of the largest US bank failures ever, which had a chilling effect on M&A activity, while higher interest rates also had an impact.
Concerns about more liquidity-related failures are now subsiding. The US Federal Reserve held interest rates steady in the past three Federal Open Market Committee meetings and signaled rate cuts in 2024, which is boding well for a return to dealmaking.
In Europe, M&A deal volume dropped by 33.6% year over year to a total of 79. A lack of progress in Europe's banking and capital markets unions lessened the appeal of cross-border consolidation in addition to higher interest rates.
Deal volume in Asia-Pacific fell 18.8% to 52. A challenging fundraising market and geopolitical uncertainties all weighed on dealmaking in the region, as did higher interest rates, according to analysts, with these conditions likely to remain in early 2024.
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Greater clarity in economic outlook and the end of the rate-hike cycle could stoke growth in M&A deals, according to a report by S&P Global Market Intelligence. Pent-up demand could offer a greater boost to dealmaking activity.
Largest deals in different regions
The largest M&A deal in 2023 involved the sale of a portfolio of assets, including loans, asset management plans, corporate bonds and deposits with banks, by Shenyang, China-based Shengjing Bank Co. Ltd. to Liaoning Asset Management for $24.07 billion.
This was followed by the merger of Los Angeles-based Banc of California Inc. and PacWest Bancorp, an all-stock deal valued at $937.72 million. The former PacWest was among the banks most caught up in the turmoil surrounding the failures of Silicon Valley Bank and Signature Bank.
Helsinki-based Nordea Bank Abp's proposed $1.74 billion acquisition of the Norwegian personal customer business of Copenhagen, Denmark-based Danske Bank A/S was Europe's biggest deal. Danske plans to focus on business, corporate and institutional banking in the country. The deal includes 15 Danske Invest Horisont funds, which are primarily distributed to personal customers in Norway.