03:49 PM EDT, 07/01/2024 (MT Newswires) -- Merger and acquisition activity in the banking sector rose sequentially and annually in the second quarter, but is likely to remain "subdued" in the near term, Raymond James said Monday.

In the quarter through June, 30 M&A deals were announced, up from 27 in the previous quarter and 28 a year earlier, the firm said, citing S&P Global ( SPGI ) data. So far this year, there have been 57 deals announced with a total value of about $6.5 billion. SouthState's ( SSB ) pending acquisition of Independent Bank Group ( IBTX ) , and UMB Financial's ( UMBF ) proposed takeover of Heartland Financial (HTLF) have accounted for roughly 62% of the year-to-date deal value, according to the report.

Deal activity levels have grown sequentially in four of the last five quarters, even as "the still-uncertain economic backdrop, (accumulated other comprehensive income) impacts, normalizing credit trends, and ongoing political uncertainty have all weighted on getting deals to the finish line," Raymond James said.

The firm expects proposed updates to the Federal Deposit Insurance Corp.'s current bank merger review guidance to apply "extra scrutiny to resultant institutions with more than ($100 billion) in assets and introduce more subjective, forward-looking assessments across a range of factors, thus adding another impediment to already-subdued bank M&A activity." The move to appoint Christy Goldsmith Romero as the next FDIC chair may add "some additional uncertainty" given her strong enforcement background, Raymond James said.

The firm added Ameris (ABCB) to its acquirers list, citing the company's potential to be "opportunistic in the M&A markets should the right situation arise." Ameris is likely to focus on banks with "complementary business lines and strong cultural fits, where its excess capital, strong currency and attractive footprint leave it well-positioned for a potential deal," according to the note.

The recent momentum in deal activity may continue amid an approval of a faster merger review process by the FDIC board and a potentially more favorable environment for bank M&A under a Republican sweep or split government in the upcoming US elections, the firm said.

"Over the next several years, we believe industry consolidation will continue but that activity will be subdued in the nearer-term," Raymond James wrote. "M&A remains a secular theme that will play out in earnest over the next decade given our belief that banks are sold and not bought."

As of the end of March, there were more than 4,500 FDIC-insured institutions in the US, according to the firm. Raymond James said "fatigued" bank management teams and boards are likely to become more apt to sell their franchises given factors such as wage inflation and potential pressure on profitability in case of an economic slowdown or a downturn.

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