Remember the late 1990s? Banks were swallowing each other left and right, the Riegle-Neal Act had just blown the doors off interstate banking, and suddenly you had behemoths like Citigroup being born practically overnight. Stock prices went parabolic for years. Fast-forward to today and something that feels eerily similar might be quietly brewing again—only most people haven’t noticed yet.
I’ve followed the banking sector for two decades, and every time the regulatory pendulum swings toward lighter touch, the M&A floodgates open. We’re standing at what could be the most important inflection point since the Gramm-Leach-Bliley era. And one of the sharpest analysts in the space just put it in plain English: the next bank merger boom is coming, and it could run all the way through 2028.
Why Deregulation Is the Real Catalyst Right Now
For years, post-2008 rules made life miserable for anyone trying to put two banks together. If your combined assets pushed you north of $100 billion—or worse, $250 billion—you basically needed an act of Congress (or at least a very patient Fed) to get a deal done. Approvals dragged on forever, capital requirements exploded, and the dreaded LFI—Large Financial Institution—designation turned into a compliance nightmare.
All of that is starting to crack.
Stress-test clarity is improving, the Basel III “endgame” proposal is being walked back, and regulators are signaling they’ll be far less hostile to mergers that actually make sense. Translation: a lot of mid-sized and regional banks that have been stuck in no-man’s-land suddenly become attractive prey—or willing consolidators themselves.
We continue to believe that banks are in a generational period of deregulation… Clarity on stress tests, finalization of Basel 3 endgame and a lighter touch toward deals and regulatory interpretation are all in early stages that can continue through 2028.
— Top-ranked banking analyst
When you hear someone who has been dead-right on banks for 30-plus years lay it out that bluntly, you sit up and listen.
Three Big Tailwinds That Almost No One Is Pricing In
- Faster merger approvals—deals that used to take 18-24 months could close in under a year.
- Branch overlap heaven—cost synergies are massive when you can shut 30-40% of combined branches in overlapping markets.
- LFI threshold effectively moving higher—fewer buyers get slapped with the harshest oversight, so more banks can actually afford to write big checks.
Add it all up and you get a perfect setup for serial acquirers to start rolling up smaller players at reasonable multiples while premiums still look attractive.
History Rhymes—What Happened Last Time We Did This
Let’s take a quick trip back to 1995-2000. The number of U.S. banks fell from roughly 10,000 to about 7,000 in five years. The ones that participated—either as buyer or seller—absolutely crushed the market. Buyers got bigger, more efficient, and traded at premium multiples. Sellers delivered 30-50% premiums to shareholders practically overnight.
Today we have roughly 4,600 banks left. Plenty of room for another big leg down in count—and up in concentration.
The Names That Keep Popping Up on Every Smart-Money Radar
So who stands out? Analysts recently ran a pretty exhaustive screen across the 450 largest publicly traded banks and thrifts. They scored each one on ten different dimensions—valuation, profitability, efficiency, loan-to-deposit ratio, management age, activist involvement, geographic footprint, you name it.
The highest scorers are the ones you want to keep an eye on, either because they scream “takeover target” or because they’re perfectly positioned to be aggressors once the dam breaks.
Among the covered mid-cap names, three rose straight to the top:
- BankUnited — 8 out of 10 score. Clean balance sheet, Florida-centric franchise that would be a perfect bolt-on for almost any large buyer.
- Banc of California — 7/10. Recent merger with PacWest still digesting, but the combined entity has serious scale in a hot market.
- First Horizon — 7/10. Remember when TD Bank almost bought them for $25 billion before regulators got cold feet? That premium still lingers in investors’ minds.
Then there are some lesser-followed but highly liquid names that also scored extremely well:
- Kearny Financial
- OceanFirst Financial
- ConnectOne Bancorp
- Blue Ridge Bankshares
These aren’t household names yet, but in M&A land, that’s often exactly when you want to own them—before the banker pitch books start circulating.
Why Premiums Could Be Even Fatter This Cycle
Here’s something fascinating: because the regulatory overhang has been so severe for so long, valuation dispersion in the sector is near all-time highs. The best banks trade at 1.8x tangible book or higher. The merely decent ones languish at 0.9x-1.1x. That gap is insane.
When the M&A window opens wide, that dispersion compresses fast. Buyers pay up for quality franchises, and suddenly a 40-60% premium doesn’t look crazy when the target was chronically undervalued to begin with.
Who Might Do the Buying?
Think about the usual suspects—Truist, Huntington, Regions, Fifth Third, Citizens, KeyCorp—all sitting right in that sweet spot where another $50-100 billion of assets doesn’t trigger existential regulatory pain but adds huge market share in key states.
And don’t sleep on the super-regionals that already cleared the $250 billion hurdle years ago—PNC, U.S. Bancorp, and even the money-center giants could pick off bite-sized deals without breaking a sweat.
Risks? Of Course—But They’re Mostly Priced In
Look, nothing is guaranteed. Interest rates could stay high longer than expected and pressure net interest margins. Commercial real estate still has question marks. And regulators can always change their minds.
But here’s the thing: the market has spent the last two years pricing in the worst-case scenario for banks. Tangible book values are higher than ever, capital ratios are rock-solid, and most names still trade below historical averages. In other words, the downside feels pretty well protected while the upside from a real M&A re-rating could be dramatic.
The Bottom Line for Investors
If you’ve been waiting for a clear catalyst in financial stocks, this might finally be it. A multi-year deregulation runway combined with historically cheap valuations and massive cost-synergy potential is the kind of trifecta that doesn’t come around often.
In my experience, the best time to position for an M&A wave is right before the first big deal hits the tape and reminds everyone how the game is played. Once that happens, premiums compress fast and the easy money gets made early.
So keep those takeover lists handy. The next few years in banking could feel a lot like the late 90s—only with better capital, cleaner balance sheets, and fatter premiums for anyone paying attention today.
Sometimes the biggest opportunities hide in the sectors everyone has written off. Banking just might be one of them.
