The United States banking industry is unique in comparison to its global counterparts. The United States has more banks than most of the rest of the world combined, a historical differential that may change due to necessity. Midsize banks face the same struggles as credit unions and smaller banks due to interest rates and real estate, but also face the same regulatory challenges as the nations largest financial institutions.
July will be a telling month for regional banks as financial institutions such as KeyCorp will report revenue losses. The answer for midsize bank survival may be to scale through mergers and acquisitions.
The United States is unique compared to European countries, however, in that regions of the country are as big as several European countries combine. Some analysts are projecting that there might be regional powerhouses in specific areas of the country just as there are banks in areas such as the Nordics in Europe that control much of the banking industry in those countries.
Lawmakers such as Elizabeth Warren will likely have a difficult time taking sides, as the perceived enemy of the left in Washington D.C. have been the largest banks such as JP Morgan, the very ones that helped fend off the potential banking crisis in April.
Regulators may have inadvertently strengthened the power of the largest financial institutions, and will need to shift their thinking into creating more powerful banks so that the top five or six U.S. banks do not become even more powerful. If interest rates continue to rise, and commercial real estate continues to suffer, large volumes of banking acquisitions will be one of the biggest stories of 2024.
America’s unique banking structure that has allowed for midsize banks will change, and these institutions will need to scale.