UBS Expects Pandemic to Boost Bank M&A in Europe and the U.S.

UBS Group AG expects the coronavirus pandemic to further boost consolidation in the banking sector amid increasing threats from low interest rates and intensified competition.

“There are likely to be more mergers and acquisitions in the U.S. and especially the European Union, with growing regulatory appetite,” UBS said in its annual report published Friday. Switzerland’s biggest bank also said it sees further disposals of non-core businesses and assets as banks seek to simplify their business models to reduce operational and compliance risks.

The lack of common deposit protection across the EU and a complex regulatory landscape have so far prevented transformational deals in Europe’s fragmented market. The pandemic’s fallout has however raised the pressure, with regulators and banks including Deutsche Bank AG and Intesa Sanpaolo SpA signaling a need for change.

Across the Atlantic, a combination between Buffalo, New York-based M&T and People’s United last month marked the latest deal among regional banks. The mergers are aimed at helping smaller firms compete against giants such as JPMorgan Chase & Co., which is moving into new states and spending billions of dollars annually on digital offerings.

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