High interest rates have allowed banks to build cash reserves for takeovers, although national concerns could be hindering pan-European deals.
Europe’s banking landscape is rife with talks of takeovers.
Italy’s UniCredit, with Andrea Orcel at the helm, is currently building its stake in Germany’s Commerzbank, after expanding its reach in Romania.
France’s BNP Paribas, meanwhile, has been eyeing insurer AXA – while BBVA is steaming ahead with its bid for Sabadell.
In short, banking mergers are “hot” right now – in the words of Hyder Jumabhoy, M&A partner at White & Case.
For 2025, they’re looking “red hot” – he told Euronews.
Why the current frenzy?
In the wake of the 2008 financial crisis, mergers and acquisitions in the eurozone’s banking sector slowed significantly.
After an era of aggressive expansion, banks could no longer pursue deals with the same appetite – limited by tougher financial conditions and regulation.
Between the pre-crisis decade and the period from 2008 to 2020, banking M&A deals dropped by about two-thirds – in terms of assets transferred.
Although regulation remains tight, interest rates are now one factor driving an uptick in deals.
In one respect, high lending costs over the last few years have allowed banks to generate significant profits, increasing their appetite for acquisitions.
A sign of improving health is the withdrawal of state support in previously bailed-out lenders.
The Italian state, for instance, is offloading its stake in MPS, while the UK government is exiting NatWest.
The recent decline in borrowing costs is also behind an increased interest in M&A – as lenders look for ways to diversify revenue streams.
This is particularly significant as banking habits change, according to Hyder Jumabhoy.
“Customers now don’t want to buy one product from you. They want to buy six products,” he explained.
“This means a lot of large banks are actually operating multiple brands within their umbrella.”
Mergers can allow lenders to combine expertise and therefore benefit consumers, provided that market competition remains healthy.
In the case of international mergers, consolidating niches can also mean sharing geographical expertise.
Cross-border hostility
Creating banking powerhouses is arguably one way that the eurozone can boost its competitiveness if these lenders are better positioned to invest in innovation.
“Scale is important to the ability of banks to compete globally,” said Marco Troiano, head of financial institutions at Scope Ratings.
“With investment banking, for example, you want to be able to keep a very large balance sheet so that you can dilute exposures,” he told Euronews.
According to some experts, one factor limiting banking expansion is a domestic mindset – coupled with a hostility towards cross-border mergers.
From 1999 to 2020, ECB figures show that around 80% of all completed banking M&A deals in the euro area were within one country.
This preference for “national champions” is visible in deals currently making headlines.
German Chancellor Olaf Scholz, for instance, has shown his opposition to the potential takeover of Germany’s Commerzbank by Italian lender UniCredit.
“Unfriendly attacks [and] hostile takeovers are not a good thing for banks,” said Scholz in September.
This was partially linked to the way that UniCredit stealthily built its stake.
Over in France, meanwhile, President Emmanuel Macron has shown his support for an international merger – in theory.
Speaking on the sidelines of the “Choose France” summit earlier this year, the President reiterated his long-time support for financial integration.
“Dealing as Europeans means you need consolidation as Europeans,” said Macron.
Asked if he would be ready to accept the hypothetical sale of France’s Société Générale bank to Spain’s Santander, he replied: “Of course”.
Even with political blessing, cross-border deals still face bureaucratic hurdles.
EU projects seeking to tackle this, such as the common deposit scheme, are advancing slowly.
Controlling risk
When establishing major cross-border banks, stability must also be a key consideration – according to Thierry Philipponnat, chief economist at NGO Finance Watch.
International deals can result in banks that are “too big to fail” (TBTF), he argued, meaning that their collapse would be disastrous for the wider economy.
“Banks are global in life and national in death,” he warned – quoting former Bank of England Governor Mervyn King.
In other words, national governments will often step in to save failing banks, even though they may have benefitted from international support in their heyday.
The question of whether Europe’s banks efficiently manage risk is – however- still hotly-debated.
“Mergers are extremely well-regulated,” said Marco Troiano. “Banks have a lot of liquidity and there are a lot of backstops.”
He added that M&A could also be a way to improve stability, creating “a better distribution of risk between countries”.
Some voices, not so concerned about TBTF, even suggest that Europe is too risk-averse, giving international competitors an advantage.
US banks are notably planning for an era of deregulation under a second Trump presidency, likely to spark an increase in merger activity.
On the other side of the Atlantic, Europe is nonetheless poised for its own flurry.
“Larger deals are now on the table and are being negotiated in real time,” said Hyder Jumabhoy.
“Pan-European consolidations will likely be announced in the first half of next year.”
