But when they kick off the Q1 earnings season in mid-April, banks can change the negative narrative — or reinforce existing concerns about the sector.
Mergers and acquisitions dropped an astounding 44% in Q1 and 47% in the US, Leon wrote. There were fewer deals over $10 billion and less activity for both private equity-backed M&A and cross-border M&A, he added. Meanwhile, announced global deals fell 17% from last year, and announced transactions fell to the slowest rate since Q1 2020.
The decline in dealmaking and debt issuance can be traced to elevated interest rates, which limit transaction activity by making it more expensive to borrow money., which is the difference between what banks collect from interest-bearing assets and the rate at which they pay interest. But when total deposit costs rise as well, Leon noted that bank profitability suffers.
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