Large bank M&A deals face rougher ride from regulators: Fitch

Mega deals in the U.S. banking sector — such as Bank of Montreal’s planned US$16.3-billion acquisition of Bank of the West (BOW) — are attracting increased antitrust attention in the U.S., adding execution risk to such transactions, says Fitch Ratings.

In a new report, the rating agency said large bank mergers and acquisitions are coming under increased scrutiny from U.S. legislators and regulators, with the federal government demonstrating “renewed interest in antitrust enforcement” — particularly in the banking sector.

“Politicians are increasingly debating the rules and regulations around bank mergers, with potential moratoriums on deals over US$100 billion,” Fitch said.

The report noted that transactions, such as BMO’s planned deal for BOW could be impacted, along with U.S. Bancorp’s deal for MUFG Union Bank, M&T Bank’s acquisition of People’s United Financial, and Citizens Financial Group’s merger with Investors Bancorp.

“To the extent an announced transaction is delayed, deals can lose momentum and waste firms’ time and resources, often at the expense of strategic plans and long-term goals,” it said.

The BMO-BOW deal is expected to close by the end of 2022, subject to regulatory approvals.

While large deals may be under increased threat, Fitch said transactions involving small and mid-sized regional banks are expected to continue in the year ahead, “driven by a desire for increased scale and enhanced franchise strength either through new geographies or by growing market share within their existing footprint.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.