We see five significant trends in banking and capital markets that are likely to shape deal activity in 2026: continued bank consolidation and strategic acquisitions, the blurring of traditional sector boundaries, a renewed focus on portfolio optimisation through loan portfolio and regional carveouts, the expanding role of alternative funds in financing transactions, and a shifting regulatory environment for capital requirements.
Consolidation and strategic expansion remain the primary M&A engine
Bank consolidation and strategic expansion remain key drivers of M&A supported not only by banks’ focus on scale, efficiency, and strengthening the customer base, but also by a gradually more accommodating regulatory backdrop in the US and UK, as we note below. Domestic banking M&A has been active in recent months. In the US, regional bank consolidation has continued with transactions such as Fifth Third Bancorp’s $10.9bn acquisition of Comerica, Pinnacle Financial Partners’ $8.6bn merger with Synovus Financial and Huntington Bancshares Incorporated’s $7.4bn acquisition of Cadence Bank, aiming to expand regional footprints with limited overlap. In Europe, consolidation has been most evident in Italy, where several domestic banking combinations continue to reshape the competitive landscape. While domestic or in-region transactions dominate, the market remains ripe for cross-border deals, and we are watching to see if that trend revives. In Asia Pacific, Japanese institutions have cumulatively invested more than $100bn in US financial services firms over the past decade; however, there have been no large bank acquisitions in the past year following a flurry of activity in 2023 and 2024, suggesting a near-term pause rather than a reversal in cross-border ambitions.
Convergence reshapes banking M&A strategy
Traditional sector boundaries within financial services continue to blur, as commercial banks increasingly pursue acquisitions of insurers and asset managers to diversify earnings and deepen client relationships. A recent example is BNP Paribas Cardif’s €5.1bn acquisition of AXA Investment Managers. This illustrates banks’ growing appetite for adjacent capabilities beyond core lending such as widening the range of traditional and alternative assets available to customers, expanding distribution networks, and enhancing innovation capabilities.
Divestitures and carve-outs as core strategic tools
Banks are increasingly pursuing loan portfolio sales and regional carveouts as they refocus on core markets and improve capital efficiency. An example of loan portfolio sales includes Atlantic Union Bankshares’s sale to Blackstone of an approximately $2bn commercial real estate loan portfolio. HSBC Continental Europe’s proposed sale of HSBC Bank Malta to CrediaBank, HSBC’s announced exit of its retail banking business in Sri Lanka, and other non-strategic activities illustrate how larger financial institutions are simultaneously divesting non-core positions and doubling down on priority growth areas.
Alternative capital redefines deal financing
Alternative funds are playing a greater role in banking and capital market transactions, particularly in the US and Europe, underscoring the growing influence of private capital as both a financing source and strategic partner. A recent example is GATX and Brookfield Infrastructure’s approximately $4.4bn acquisition of Wells Fargo’s rail operating lease portfolio through a newly formed joint venture which completed in January 2026. While this trend has yet to meaningfully extend to Asia, we believe it is only a matter of time until it does.
Regulatory shifts may create new M&A opportunities
The regulatory environment is shifting, and the past few months have seen significant changes in banking regulation across several jurisdictions, particularly with respect to the level of capital banks are required to hold.
In the US, the Federal Reserve has approved a reduction in the supplementary leverage ratio, which stipulates the amount of Tier 1 capital banks must hold against total leverage. In the UK, the Bank of England has reduced required Tier 1 capital from 14% to 13%. Meanwhile, regulators in the European Union, notably the European Central Bank, are considering changes to the capital framework, to simplify the different requirements and buffers banks currently need to comply with. On the other hand, the implementation of the Basel III final (Basel IV) reforms is expected to lead to higher capital requirements from 2028, largely necessitated by the expiry of transitional arrangements.
Changes in capital requirements may prompt banks to take further action, including through M&A. An easing of requirements could free up capacity for other activities, while tighter capital standards may increase the need for consolidation and sharpen the focus on capital allocation across the banking sector.