European bank M&A is back with a bang
European bank mergers and acquisitions (M&A) are on the rise, with a notable focus on large domestic deals and a gradual return of cross-border activity. Per the full note from ING, notable transactions include UniCredit's pursuit of a takeover of Commerzbank, potentially signalling a transformation in the European banking landscape. M&A values have already surpassed 2025 totals, exceeding €53 billion year-to-date, with projections suggesting sustained activity into 2027. As banks enhance their profitability post-crisis, the implications on the euro, particularly against the USD, will warrant close attention.
What the desk is arguing
The resurgence of European bank M&A activity highlights shifting dynamics in the sector, where deals are set against a backdrop of improved profitability and stronger capital buffers. The desk frames this as a significant turning point, informed by recent commentary from ING which emphasizes pending deals, such as UniCredit's acquisition of Commerzbank, projected to enhance competitive positioning within the market.
The year-to-date M&A deal value surpassing €53 billion, alongside pending transactions totaling around €39 billion, suggests that we are witnessing a robust revitalization of the M&A landscape not seen since the early 2010s. Prior to this resurgence, deals primarily revolved around financial recovery, whereas today's environment allows for strategic growth opportunities.
Where it sits in our coverage
Although no specific consensus targets are currently held, the M&A landscape's trajectory could impact our view on the euro. Firms' Dec-26 targets for the EUR/USD pair range between 1.04 and 1.10, providing a backdrop for this discussion on European bank transactions.
How other firms see it
jpmorgan sees the potential for growth in euro-denominated assets, aligning with the M&A uptick, while bofa maintains a cautious stance on currency strength amid potential geopolitical ramifications.
The trajectory of the euro may be impacted by intra-sector consolidations as trends in profitability evolve, making monitoring of shifts in key economic indicators essential, particularly those linked to the European Central Bank's positioning and monetary policy.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01European bank M&A activity is experiencing significant growth, particularly in domestic transactions.
- 02UniCredit's bid to acquire Commerzbank underscores a potential transformation in cross-border banking dynamics.
- 03M&A deal values have surpassed €53 billion year-to-date, indicating robust sector revitalization.
- 04The shift towards profitability and capital strength enables stronger banks to pursue strategic acquisitions.
Market implications
Traders should watch the EUR/USD pair closely, particularly as further M&A activity may bolster euro strength against the dollar. Key levels to monitor are around 1.075, as market sentiment shifts with continued deal announcements.
Risks to this view
A sudden decline in market sentiment due to geopolitical instability or regulatory pushback could invalidate the current bullish outlook on euro strength and M&A activity. Additionally, any significant economic data highlighting weaknesses in bank profitability would warrant a reassessment.
Articles European bank M&A is back with a bang Published 11:52 Credit Financial Institutions Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download European bank M&A has seen a resurgence in recent years, and 2027 should stay busy. Domestic deals still dominate, while cross-border consolidation is harder but is also picking up. Regulation is becoming more supportive, but politics and execution still matter.
Expect more deals, but a transformation of Europe's banking sector is still some way off Jesse Norcross UniCredit and Commerzbank are at the centre of Europe’s closely watched push towards cross-border banking consolidation European bank M&A is back European bank M&A has seen a strong resurgence, with several large-scale deals making headlines. UniCredit’s high-stakes takeover of Commerzbank, once deemed very unlikely but now moving closer to completion, could be Europe’s most significant cross-border transaction in years. Italy remains one of Europe’s bank M&A hotbeds, with multiple banks taking part in the ongoing consolidation wave.
Other banks have also been active, and we expect M&A to remain elevated in 2027. Year-to-date M&A deal value has already surpassed the 2025 total, reaching €53bn including the UniCredit-Commerzbank transaction and based on deals valued at €100m or more. Furthermore, deals pending or intended total €39bn, which includes the potential takeover of Banca Monte dei Paschi by Intesa Sanpaolo, currently valued at around €34bn.
All in, this would bring deal value back to levels not seen since the early 2010s. European bank M&A volumes have seen a resurgence (€bn) Source: Refinitiv, ING "> Source: Refinitiv, ING The rationale for European bank M&A has changed. After the financial crisis, deals were mostly about repair, followed by a wave of deals involving stronger domestic banks buying weaker rivals.
Today, the backdrop has shifted – profitability and capital levels are stronger, making the obvious cost-efficiency story less compelling on its own. Instead, banks are using M&A to add scale, deposits and fee-generating diversification, while the need to close the gap with US rivals remains a key driver. The industrial logic has also strengthened, as fixed costs are rising in areas such as technology, AI, compliance, as well as personnel.
Rising investment requirements mean that remaining subscale is becoming more expensive, even for highly profitable banks. Domestic dominates, but cross-border competes UniCredit-Commerzbank remains the sector’s most closely watched deal and could become the first major cross-border acquisition since the financial crisis. UniCredit has slowly been building its stake rather than a clean takeover and is now deemed to hold effective control, despite currently owning around 50% of the shares.
Furthermore, it is also not entirely a leap into an unfamiliar market, as UniCredit already has a significant banking business in Germany through its subsidiary, HVB. The deal has also faced considerable pushback as well as political and stakeholder opposition, but is now looking increasingly likely to proceed. It has highlighted the difficulty of pulling off a large-scale cross-border deal for European banks.
Yet it is now becoming the clearest live test of whether Europe is genuinely ready for cross-border bank consolidation. Domestic deals remain the rule, but we have seen other examples of cross-border deals. These include BPCE’s acquisition of Portuguese peer Novo Banco; Erste Bank's acquisition of Santander Bank Polska; and Crédit Agricole acquiring IKB to increase its presence in Germany.
Some banks are also looking across the pond, such as Santander, which acquired Webster Financial Corporation in the US for USD12.5bn. These transactions are important, but they do not yet amount to a broad-based cross-border consolidation wave. Many involve banks already familiar with the target market or assets that complement an existing local business.
Selected transaction details Source: Company reports, ING "> Source: Company reports, ING Italy is still riding the wave Italy has become one of Europe’s busiest M&A markets, riding a new wave of consolidation, with Banca Monte dei Paschi (MPS) at the epicentre. The bank completed the acquisition of Mediobanca in 2025, and this year approached Banco BPM and Banca Generali for a merger as a counteroffensive to Intesa Sanpaolo’s hostile bid for MPS. The counteroffensive now appears less likely, as key shareholders have opposed parts of MPS’s merger plans and have also backed Intesa’s bid.
The ECB has also provided authorisation to take control of MPS, representing an important step for the €34bn takeover. Alongside this, we had the BPER–Popolare di Sondrio merger earlier in the year, adding to Italy’s consolidation. Why is Italy so active in particular?
Well, Italy remains quite fragmented (see below) and still offers a large domestic synergy pool, even after the wave of M&A that has already taken place. Furthermore, the country has meaningful industrial scale and offers further revenue diversification opportunities for banks and insurers. Although the obvious combinations are becoming less evident in Italy, we expect this to continue to drive M&A activity in 2027.
Top 5 banks' lending market share by country (2025) Source: AFME, ING "> Source: AFME, ING It's not only about getting bigger The deal mix is also broadening, as banks are increasingly focusing on fee income as well as scale, while also stepping into capital-light businesses. Deals in sectors such as wealth management, asset management, payments & FX and insurance are likely to feature prominently. NatWest Group’s acquisition of Evelyn Partners is a good example.
The combination created the UK’s largest Private Banking and Wealth Management business, while lifting Natwest’s fee income by 20%. Similarly, BNP Paribas’s acquisition of AXA Investment Managers in 2025 created a €1.5tn asset management business, as the bank is seeking to compete with US asset management rivals and grow its fee income. In Germany, Deutsche Bank and DWS were reported to be exploring a potential minority investment in the life insurance business Frankfurter Leben.
This would mark Deutsche’s return to life insurance after more than a decade. Consolidation can support bank performance But does consolidation actually deliver better outcomes? The evidence is not entirely clear-cut, but overall points in the right direction.
While increasing scale is not always the best use of capital, in general, more consolidated markets tend to have more stable and, in some cases, higher profitability. The ECB is in favour of further consolidation where appropriate, as it sees the benefits of diversification and efficiency. On the other hand, capital can be reduced following a merger.
This could be a downside, as better capitalised banks tend to enjoy lower funding costs and thus have more room to lend to the real economy. The outcome therefore depends on the trade-off between longer-term synergies and the upfront capital, execution and integration costs. ECB data show an association between more concentrated banking markets and profitability.
As the chart below shows, countries with a high level of concentration (defined by a higher Herfindahl-Hirschman Index coefficient) tend to have higher net interest margins on average. Still, net interest margins in Europe are structurally lower than in the US, where they tend to be between 3–4%. Net interest margin vs market concentration for European countries (2025) Source: ECB, ING "> Source: ECB, ING Similarly, a higher level of market concentration in European countries is associated with a lower cost of risk.
The correlation is modest, with some clear outliers, but the numbers show that greater concentration can lead to lower asset quality costs, although the relationship should perhaps not be interpreted as causal. Still, taken together, this suggests that consolidation can improve banking markets. Cost of risk vs market concentration for European countries (2025) Source: ECB, ING "> Source: ECB, ING Regulation is helping, but can get in the way The Banking Union has made deals easier to assess: the ECB has become the single prudential supervisor for large banks, capital rules are more consistent, while resolution planning is now much clearer than it was even a decade ago.
But as the Draghi report noted, the incomplete Banking Union means Europe’s banks remain less profitable than their US counterparts. There is a shift underway, though. The EU Commission plans to table a broad Banking Package in the first quarter of 2027, with measures covering cross-border capital and liquidity management, deposit insurance, prudential rules and other items.
For M&A, the most important proposals include those to give banking groups more flexibility to allocate capital and liquidity more efficiently within cross-border groups, while also applying more consistent treatment to intra-group exposures. These remain proposals rather than agreed implementations, meaning their final scope and timetable remain uncertain. The AFME estimates that regulatory ring-fencing rules mean that some €225bn of capital and €250bn of liquidity is trapped within subsidiaries, which banks cannot freely move between parent and subsidiaries.
Freeing this up could also support more cross-border transactions. Regulatory ring-fencing traps subsidiaries' capital and liquidity Source: ECB, ING "> Source: ECB, ING The European Commission is also bringing forward a new proposal to replace the European Deposit Insurance Scheme (EDIS), which could reduce national ring-fencing incentives and encourage more cross-border M&A. CMDI reform has been passed this year, which could make it easier to deal with failing banks, potentially making consolidation easier as well, although the direct impact on M&A is unclear.
The Danish compromise, which is now embedded into CRR3, allows banks to risk-weight certain insurance subsidiaries rather than deduct them from regulatory capital. This was clarified by the EBA in January 2026, and some banks such as UniCredit have received authorisation to use the Danish Compromise methodology for its insurance subsidiaries. This has improved the economics of bancassurance and could support further bank-insurance transactions.
On the other hand, national regulatory and political intervention has also put the brakes on M&A in some cases, raising execution costs and uncertainty. BBVA’s proposed acquisition of Sabadell in 2024 illustrates the problem. It took 539 days from the announcement in May 2024 to the offer failing in October 2025.
For us, the message seems clear that European regulators are seeking to improve bank competitiveness, and they see consolidation as an important part of this. Looking ahead, regulation can improve the plumbing, but it is not a dealmaker. Why 2027 should stay busy The starting point for 2027 remains supportive, with bank profitability continuing to hold up well in 2026 while capital levels remain solid.
While the geopolitical, inflation and interest rate backdrop poses headwinds, we still expect acquisition activity to remain high. On the other hand, management teams will increasingly need to choose between retaining greater capital headroom in a less market-friendly environment, shareholder payouts, or M&A. The most likely deals are still domestic.
Italy remains the M&A market of choice, but other geographies could also stand out. The Nordics are likely to see more partnerships and tech- and wealth-focused deals. Spain and Portugal are already quite concentrated, so we could see more bolt-ons.
In the UK, challenger banks and neobanks are gaining ground while deposit competition remains intense, potentially leading to more activity. The Benelux has potential catalysts following a series of government ownership reductions and increasing inorganic ambitions. Cross-border activity could also remain elevated, but we think the real litmus test remains the UniCredit-Commerzbank deal, including what happens after completion in terms of execution and integration, a process that is likely to take a few years.
The regulatory environment should also become increasingly more supportive for cross-border M&A from 2027 onwards. Overall, 2027 could be another interesting year. M&A is here to stay European bank M&A has picked up in recent years, and we expect more activity again in 2027, although we do not see a big bang.
For investors, positioning is inherently speculative. For bondholders, the main way to gain is by owning the target entity's bonds. However, this is not always the case, and bigger doesn’t always mean better, as credit ratings don’t necessarily improve either following an acquisition or merger.
We are not suggesting that a major change in the European banking landscape is imminent, as many obstacles remain, particularly with cross-border deals. But the direction of travel is interesting: larger banks often outperform smaller banks, while regulators continue to see benefits from a deeper, more integrated European banking union. Still, European banking markets remain fragmented to differing degrees, both between countries and compared to the US, presenting both opportunities and obstacles.
Outlook ECB Credit Banks Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Jesse Norcross Senior Sector Strategist, Financials Jesse joined ING’s credit team in 2023 and is based in the Netherlands, covering the financials sector.
He previously covered the real estate sector. He has worked in financial markets since… In this article European bank M&A is back Domestic dominates, but cross-border competes Italy is still riding the wave It's not only about getting bigger Consolidation can support bank performance Regulation is helping, but can get in the way Why 2027 should stay busy M&A is here to stay
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