Bank consolidation in 2022 fell well short of the prior year’s level.
There were 167 bank acquisitions announced through Dec. 28, according to data compiled by Mercer Capital. That represents a 31% decrease from 2021 and 38% from the annual average between 2017 and 2019.
The median premium was 154% of a seller’s tangible book value, relatively unchanged from 2021. The high-water mark since the 2008 financial crisis was 174% in 2018.
Several factors were in play this year, including tangible book value hits tied to unrealized losses on fixed-rate asset, lower stock prices and buyers and sellers taking their time to assess the rising rate environment.
Those issues will translate into a “challenged” M&A market in 2023, Jeff Davis at Mercer Capital wrote in a recent report. “For larger deals, an additional headwind is the significant amount of time required to obtain regulatory approval,” he added.
Davis observed that the need for core deposits could spur some acquisitions next year. “A rebound in bank stocks and even a modest rally in the bond market that lessens interest rate marks could be the catalysts for an acceleration of activity in 2023 provided any recession is shallow,” he added.