Banks positioned for M&A wave following Q1

Financial institutions that think about efficiency and growth when considering tech spend can respond quickly to merger and acquisition opportunities, Danny Baker, vice president of market strategy at technology provider Fiserv, told Bank Automation News. 

“Successful banks, when they think about their technology investment, they don’t think about efficiency from a penny-pinching [perspective],” he said. Instead, they consider ‘How can I spend money that allows me to grow exponentially without spending more?’ And that’s where mergers and acquisitions can make sense. 

In fact, when prepping for 2024, HSBC Chief Executive Noel Quinn said during the bank’s fourth-quarter 2023 earnings call on Feb. 21, “When we look at an acquisition, obviously, the first parameter is making sure it’s a strategic and accelerating growth area that we strategically want to grow.” 

Read more: Banks, fintechs bank in the M&A game

ING, too, is looking to M&A as it sees revenue and business opportunity in the market, CEO Steven van Rijswijk said during the bank’s Q1 earnings call May 2. The company is open to acquisitions if they fit “into our culture and our digital operations,” he said. 

Similarly, Lloyds Bank is cautiously approaching M&A activity, and aims to target companies in the regtech, insurtech and cybersecurity space, Robin Scher, head of fintech investment at Lloyds, said at FinovateEurope in February. 

Recent M&A activity includes:

• Capital One acquisition of Discover Financial Services; 
• Barclays acquisition of Tesco; and
• Nationwide acquisition of Virgin Mobile.

M&A revenue  

While many FIs are looking to M&A to expand their client bases and assets, others see the market as a revenue opportunity.  

In Q1, executives from Morgan Stanley, Goldman Sachs and KeyBank said they expect higher revenues due to M&A activity. 

Morgan Stanley is deploying technological tools for its bankers and advisers to take advantage of “a multiyear M&A cycle,” CEO Ted Pick said during the company’s April 16 earnings call. 

Goldman Sachs is increasing its private equity balance sheet from $130 billion to $500 billion in the next five years to capitalize on M&A, CEO David Solomon said during the bank’s earnings call on April 15. 

And KeyBank is seeing high traction in M&A and is strongly positioned for financing and hedging activities, CEO Chris Gorman said during the bank’s earnings call on April 18. 

“I am encouraged by the strong, broad-based results we saw in our capital markets business across M&A,” Gorman said. “We are at record backlogs in our M&A business.”