Rise in M&A predicted as retail banks navigate post-COVID crash

Analysis from global consultancy Kearney predicts a rise in mergers and acquisitions over the next few years as banks seek to reduce costs in the short-term, re-focus the core business and transform their operating models.

Kearney’s European Retail Banking Radar found that while COVID-19 limitations and border closures have stopped cross-border activities in the short term, banks will likely find M&A as the most efficient way to radically reshape their business portfolio achieve the required amount of cost reduction and transformation.

Looking at previous trends, Kearney predicts an increase in domestic mergers and acquisitions, which are often driven by the need for scale and cost reduction. 80% of banks which had undertaken domestic M&A transactions after the 2008 financial crash outperformed other local banks who hadn’t within just three years.

“Retail banks will be feeling the effects of this current crisis for the next 2-3 years, so never has there been a better opportunity for banks to reshape their cost base and revise their long-term outlook,” said Simon Kent, Partner and Global Head of Financial Services at Kearney.

“Our research and analysis of previous market crashes indicate that change will be needed for most European retail banks, requiring bold decisions and quick action.