Banks and Thrifts Report: Q3 2020

Following a normal Q1, bank M&A activity dropped significantly in the U.S. after the start of the COVID-19 pandemic. In Q3, activity showed a modest rebound. Most community banks continue to wait out the pandemic as many of their corporate customers (restaurants and retailers in particular) remain closed or have significantly reduced income. Banks face uncertainties around the length of the economic recovery, Fed policy regarding interest rates, and potential regulatory changes. In the near term, acquirers may look to capitalize on current low P/BV multiples to find quality assets with strong loan portfolios that continued to perform during the pandemic. With net interest margins likely to remain squeezed, institutions that have invested in noninterest income producing services and have a high-quality technology infrastructure will remain attractive.