What is M&A and why does it matter for banking stocks?

M&A stands for Mergers and Acquisitions, which involves companies combining through various transactions. In banking, M&A matters because it allows institutions to gain scale, cut costs, and improve profitability. When banks merge, they can eliminate duplicate operations, expand their customer base, and increase their competitive position. For investors, banking M&A can create value through higher stock prices for acquisition targets and improved long-term performance for successful acquirers.

Why is UniCredit's stake in Commerzbank significant?

UniCredit's 29% stake in Commerzbank is significant because it represents the first major cross-border banking acquisition in Europe in many years. This move signals that regulatory attitudes toward European banking consolidation have changed, potentially opening the door for many more similar deals. The European banking sector has remained highly fragmented compared to the US, with many smaller, less profitable banks. This transaction could be the catalyst that triggers a wave of consolidation across the continent.

How do investment banks benefit from increased M&A activity?

Investment banks benefit from M&A activity by earning advisory fees for helping companies plan, negotiate, and execute merger transactions. These fees are typically calculated as a percentage of the total deal value, so larger transactions generate bigger fees. Investment banks also earn additional revenue by providing financing for deals, conducting valuation analysis, performing due diligence, and helping with regulatory approvals. For pure-play advisory firms like Lazard or Evercore, increased M&A activity directly translates to higher revenue and profit.

What's the difference between European banks and investment banks in this theme?

This theme includes two distinct types of financial institutions: European universal banks (like Deutsche Bank and Santander) that provide retail and commercial banking services, and global investment banks (like Goldman Sachs and Morgan Stanley) that specialize in advisory services. The European banks are potential participants in mergers and acquisitions - they could be buyers, sellers, or merger partners. The investment banks, on the other hand, would advise on these deals and earn fees for facilitating transactions, but aren't typically merger candidates themselves.

Why has European banking consolidation been slow until now?

European banking consolidation has been slow for several reasons. Regulatory barriers made cross-border mergers difficult, with different countries having varying rules and supervisory frameworks. Political concerns about job losses and protecting national banking champions also created obstacles. Additionally, many European banks struggled with profitability, bad loans, and legacy issues following the 2008 financial crisis and European debt crisis, making them less attractive merger partners. Recent regulatory harmonization through the European Banking Union and improved bank balance sheets have now created more favorable conditions for consolidation.

15 handpicked stocks

European Banking M&A

UniCredit's major stake in Commerzbank signals the start of European banking consolidation. Our experts have selected companies positioned to benefit from this wave, including potential M&A targets and the investment banks that will earn fees from these deals.

Han Tan | Market Analyst

Published on July 10

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

Deutsche Bank AG

Current price

$35.27

As Germany's largest bank and a direct competitor to Commerzbank, Deutsche Bank is at the center of any German or European consolidation talk, either ...

As Germany's largest bank and a direct competitor to Commerzbank, Deutsche Bank is at the center of any German or European consolidation talk, either as an acquirer or a potential merger partner.

Banco Santander, S.A.

SAN

Current price

$10.16

This Spanish banking giant has a long history of cross-border acquisitions and is a likely participant in any wave of European banking M&A.

Banco Bilbao Vizcaya Argentaria, S.A.

BBVA

Current price

$19.08

Another major Spanish bank with a strong M&A track record, making it a key potential player in the consolidation of the European banking sector.

UBS Group AG

UBS

Current price

$40.40

Barclays PLC

BCS

Current price

$20.63

Lloyds Banking Group plc

LYG

Current price

$4.53

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About This Group of Stocks

Our Expert Thinking

UniCredit's move into Commerzbank has triggered what could be a major wave of European banking consolidation. After years of fragmentation, European banks are finally looking to merge across borders to gain scale, improve efficiency, and boost profits. This theme captures both sides of this trend.

What You Need to Know

This group includes two types of companies: major European banks likely to participate in mergers (as buyers or sellers), and global investment banks that will earn advisory fees from these deals. The timing is significant as regulatory attitudes toward cross-border banking mergers have become more favorable.

Why These Stocks

These companies were carefully selected to provide direct exposure to European banking consolidation. We've included major banks from Germany, Spain, and the UK that could be central players in merger activity, alongside top advisory firms positioned to benefit from increased deal flow.

Group Performance Snapshot

6 of 15

Stocks Rated Buy by Analysts

6 of 15 assets in this group are rated Buy by professional analysts.

5.3% vs 4%

Group Growth vs Bank interest

This group averaged a 5.3% return last month, beating the typical 4% bank rate.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🔄

Banking's Big Moment

European banking is undergoing its biggest shake-up in decades. UniCredit's bold move marks the beginning of a consolidation wave that could reshape the entire sector and create significant shareholder value.

💰

Double-Sided Opportunity

This theme gives you exposure to both sides of the M&A equation: the banks involved in mergers that could see valuations rise, and the advisory firms that will collect significant fees from facilitating these complex deals.

🌍

A Long-Awaited Catalyst

European banking consolidation has been talked about for years but faced regulatory hurdles. Now those barriers are falling, creating a rare moment when a previously fragmented sector can finally integrate and improve profitability.

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