After years of drought, dealmaking is returning to the U.S. banking sector, and Wells Fargo analyst Mike Mayo broke down which firms could be the next target. Mayo, one of the industry’s most closely followed bank analysts, said the setup reminds him of the 1990s, when consolidation swept through regional and community banks following waves of regulatory relief. “I lived and worked through that period,” he said on CNBC’s “Power Lunch” Monday. “It starts a little bit, and other people look at it, but it creates a domino effect. Merger Monday is back for banks. Lookout for the next 12 months. We should see a lot more mergers. And this is the period of the greatest deregulation in three decades.” On Monday, Fifth Third Bancorp announced plans to acquire Comerica in an all-stock deal valued at $10.9 billion, marking one of the largest regional bank combinations in years. Mayo had seen it coming. In fact, he added Comerica to Wells Fargo’s takeover basket, a list of potential M & A candidates compiled by his team, six weeks ago. The head of U.S. large-cap bank research at Wells Fargo Securities said with Washington signaling a lighter regulatory touch, the environment is increasingly favorable for mergers. “You can dream the dream in this deregulatory environment. This is a more pro bank, pro business, regulatory environment, the most we’ve had in some time,” Mayo said. “I think today’s merger is evidence that Goliath’s winning in banking. Scale is more important than ever before, and that’s for distribution, that’s for brand, that’s technology, that’s to compete with the biggest bank.” Mayo said midcap banks as a category are more digestible for mergers. Other names in that takeover basket include Bank of California , BankUnited and First Horizon — all midsized banks that could attract larger acquirers seeking scale and efficiency.
M&A is coming back in a big way in banking. A top analyst believes these are the next takeouts