Banks to pursue smaller and more strategic M&As in 2026: McKinsey

Smaller banks are prone to getting acquired as they struggle with funding and tech costs.

Commercial and retail banks, particularly regional banks, are expected to continue consolidating in 2026, said McKinsey & Co.

Banks are expected to remain the most active amongst all subsectors of financial services when it comes to mergers and acquisitions (M&A), McKinsey wrote in an article published 13 February 2026.

Consolidation amongst regional banks in fragmented markets is expected to continue.

“There’s a clear regulatory shift to encourage well-capitalized domestic combinations. Smaller banks are struggling with funding and technology costs, management succession, and cost pressures from larger players, making them prone to acquisition,” McKinsey noted.

Meanwhile, larger banks are constantly looking to increase scale and efficiency, gain capabilities, and improve their resilience.

Overall, the financial services sector, including banks, are expected to pursue “smaller” and “more strategic” merger and acquisition (M&A) opportunities that offer value that can be captured quickly.

“As we noted last year, dealmakers are prioritizing targets that offer thematic fit, technology alignment, and value that can be captured quickly,” the management consulting firm said.

Artificial intelligence (AI), both generative and agentic, will help accelerate M&A activity by making it easier for acquirers to integrate quickly and capture synergies sooner than expected, McKinsey said.

Private capital is expected to become a major player in the space.

“We also expect to see significant contributions from private capital, given the increasing pressure to deploy funds; such sponsors may be able to facilitate spin-offs and carve-outs of various assets as banks double down on their core businesses,” McKinsey said.