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Banking M&A Activity On a Hot Streak Again

M&A activity is heating up substantially after a pandemic pause, with the latest deal involving Valley National Bancorp’s acquisition of Bank Leumi announced Thursday (Sept. 23).

In a statement, Valley said, “With approximately 20% of revenue coming from non-interest sources, the combination with Bank Leumi will increase Valley’s revenue diversity. Bank Leumi’s fee income is primarily driven by cash management services for commercial customers, and investment management fees within Bank Leumi’s private bank.”

Valley also intends to take advantage of Bank Leumi’s platform “to further enhance and grow its own private banking business.”

Regional banks have been on a bit of an M&A tear in recent months after deals slowed to a trickle during the worst of 2020 lockdowns. Per reporting by Business Insider, “there were 160 bank mergers in 2019, according to Dealogic data cited by The Wall Street Journal, [and] there had only been 44 in 2020 as of October [2020].”

While bank M&A picked up some steam late last year and into Q1 2021, things got really rolling by Q2. PYMNTS reported, “U.S. bank mergers and acquisitions had a good month in April, with 19 announced deals — the most since the COVID-19 pandemic began in early 2020, an S&P Global report stated. With the new level of activity, the total number of deal acquisitions reached 53 so far in 2021. That’s compared to 43 during the same period in 2020.”

Read more: Valley National Bancorp To Acquire Leumi

M&A at ‘Torrid Pace’ Through First Half

Some predicted the M&A pandemic recovery in banking early on. NCR Digital Banking Senior Vice President and General Manager Doug Brown told Karen Webster in a late 2020 interview to expect an “acceleration of deal making on the other side of the pandemic, particularly as financial institutions (FIs) recalibrate and expand their digital efforts.”

We’ve been seeing that quickening all year, with S&P Global reporting in early September that “U.S. bank M&A activity kept up a torrid pace in August as 20 deals were announced, bringing total 2021 deal announcements to 132, compared to 103 over all of 2020.”

In July, CNN Business said that it’s “no coincidence” in light of the 2018 ruling “that banks had to have $250 billion in assets, and not ‘just’ $50 billion, in order to be considered systemically important financial institutions (SIFIs) that are subject to more regulations.”

Among notable deals this year include M&T Bank Corporation acquiring People’s United in an all-stock agreement in February, and Peoples Bancorp completing its acquisition of Premier Financial Bancorp, which was announced Sept. 17.

See alsoApril Sees 19 Bank M&A Deals In US, Most Since Pre-Pandemic

Accessing New Markets and Digital Capabilities

More deals are in the pipeline for this year, including Simmons First National’s proposed acquisition of two Tennessee banks — Landmark Community Bank and Triumph Bancshares — for $146.3 million and $131.6 million, respectively, by Q4 2021, per a statement.

The most recent deal, Valley National Bancorp acquiring Bank Leumi, illuminates some the logic behind the M&A goldrush.

In its announcement, Valley Chairman, President and CEO Ira Robbins said, “Bank Leumi’s unique deposit verticals, including the technology and venture capital business, will continue the significant funding improvement that we have driven over the last few years. On the lending side, Bank Leumi will add diversification into niche C&I segments and new geographies including in California and Illinois.”

For Israel-based Bank Leumi, the deal opens more of the U.S. market for its services.

Related: Bank Disruption On The Horizon; Banking M&A Deals To Follow

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