US regional banks must consolidate to survive the “imminent” recession, said Yerbol Orynbayev, president of TurmaFinTech, in a press statement.
The warning from Orynbayev, who was Kazakhstan’s deputy prime minister between 2007-2013, follows reports that bank stocks experienced their biggest one-day slide since 2023’s regional banking crisis, according to Reuters. The dip came swiftly off the heels of President Trump’s hawkish trade policy, which saw reciprocal tariffs imposed on 57 countries.
With tariffs fueling concern that a recession is likely, Orynbayev believes that US banks’ prospects have taken a gloomy turn. Unlike the larger banks in the sector, who can survive a downturn by trading on market volatility and increasing their foreign revenues, he noted that smaller institutions will be “left no choice” but to consolidate in a bid for survival.
At the same time, if regional and community banks consolidate and secure greater capital reserves, he suggests they’ll not only have enough buffer to weather a recession but the ability to better compete with their larger counterparts.
The US ‘big four’ – J.P. Morgan, Bank of America, Citigroup, and Wells Fargo – now hold the biggest share of industry profits since 2015, according to the FT. For Orynbayev, consolidation will “open up” further opportunities for regional and community banks to harness emerging technologies, modernize, and attract new customers. He asserts that this will only benefit the long-term competition in the sector.
Orynbayev said in the statement: “The Trump administration’s trade policy will place the US economy in a precipitous situation. I am sure a recession is imminent, and the smaller yet vital players in our banking sector will have to consolidate to survive.
“Of course, it’s not all doom and gloom – consolidation offers boundless opportunities for US regional and community banks and could even allow them to better compete with the titans in our sector. With increased M&A activity, we could see smaller players greaten their capital reserves, shore up their balance sheets, and, as a result, invest more heavily in the emerging technologies vital to customer experience and retention.”