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Against a backdrop of high interest rates and regulatory pressures, the banking sector likely will see muted mergers-and-acquisitions activity over the next six to 12 months, Citizens Financial Group (NYSE:CFG) CEO Bruce Van Saun told Bloomberg Television in an interview Wednesday.
“The deal math does not work very well, and it is still opaque in Washington as to what their posture is,” he said.
At the end of August, regulators proposed implementing a rule that would require banks with assets over $100B to issue long-term debt as a way to ease winding down when a bank fails while reducing the cost to the Federal Deposit Insurance Corp.’s deposit insurance fund. In response to more than two-decade high rates and expected tightening of banking rules, some lenders have shrunk their balance sheets to boost their capital and liquidity levels.
Citizens (CFG) was one of several banks with assets of $100B-$250B that received private warnings last month from the Federal Reserve pertaining to their capital and liquidity planning.
Van Saun noted that capital markets are starting to open up for banks to advise on deals to ultimately boost revenue in the coming months, Bloomberg reported.
