Superbanks Are Back – And That's Great News

Banking consolidation is back in a big way...

Last month, PNC Financial Services (PNC) announced its acquisition of Colorado-based FirstBank for $4.1 billion.

The deal will give PNC 95 new branches across Colorado and Arizona. It's one of the biggest U.S. bank acquisitions announced this year... only smaller than Fifth Third Bancorp's (FITB) $11 billion acquisition of Comerica and Huntington Bancshares' (HBAN) $7 billion takeover of Cadence Bank.

And it marks the most aggressive move PNC has made since it tried – and failed – to acquire First Republic Bank in 2023.

Put simply, this is a power play for PNC. It will be the No. 1 retail bank in Colorado's capital by deposit share and branch footprint.

But this isn't just about PNC. As you'll see, this deal is a bellwether for a broader mergers-and-acquisitions (M&A) cycle. And that's great news for investors...

It has been roughly four decades since banks last consolidated like this...

Regular readers know that President Joe Biden's administration took a tough stance on bank mergers.

Regulators across the Federal Reserve, Federal Deposit Insurance Corporation ("FDIC"), and Department of Justice ("DOJ") grew far more skeptical of acquisitions. And they were especially skeptical of deals between big institutions.

Banks became burdened with extra regulatory hoops based on how many assets they controlled. Stringent regulations meant it wasn't worth being just above the $100 billion or $250 billion thresholds.

Instead, many banks stayed below those thresholds... waiting for a chance to merge and surge past the threshold.

The banking environment is changing in the Trump era. The president's pro-deregulation approach has paved the way for bigger banks to buy smaller ones.

But that's only part of the story.

Despite Trump's deregulation agenda, high interest rates kept M&A activity depressed...

That is, until last month... when the Fed cut interest rates by 0.25 percentage points. It cut rates another 0.25 points at its meeting yesterday. And most folks expect another cut by the end of the year.

By turbocharging the economy, the Fed will help banks succeed, too. They'll have the capital and resources to get back to dealmaking.

PNC is one of the bellwethers...

The Pittsburgh-based bank has been building toward its expansion for the past few years. In 2021, it acquired BBVA USA Bancshares for $11.6 billion in cash... bolstering its presence in Colorado and Texas.

This new FirstBank acquisition gives PNC an additional $26.8 billion in assets. And it gets a larger share of the Colorado market, plus a considerable presence in Arizona.

PNC is likely just the start...

Wells Fargo banking analyst Mike Mayo told Bloomberg that he sees a "unique window" for major consolidation in the next 12 months.

Large banks like PNC already have national platforms and strong capital positions. So they're in prime position to go shopping. As Mayo put it...

The shackles are being taken off of banks to act more in the interest of shareholders.

This is great news for bigger regional banks with clean books and cash to deploy. They can strive toward national scale... in a way nobody has achieved since Bank of America (BAC) went coast to coast in 2004.

It's also a blessing for smaller banks. Many are struggling with compliance costs, tech upgrades, and plenty of other pressures. They can't keep up with their bigger peers. So M&A may soon be the only viable path forward.

And most important for us... this setup is great news for investors. The banks that take advantage of this window are setting themselves up for success.

Keep an eye on the banks that announce big expansion plans in the coming months. Many of these deals are bound to pay off.

Regards,

Joel Litman
October 30, 2025