Wells Fargo and Citigroup Poised for Major Regional Bank Acquisitions

Charles Scharf, chief executive officer of Wells Fargo & Co., and Jane Fraser, chief executive officer of Citigroup Inc.

Caroline Brehman | Qilai Shen | Bloomberg | Getty Images

At any major banking conference or during quarterly earnings calls, one dominant topic emerges: with the merger window wide open under the current administration, which financial institutions will make a bold move?

After years of remaining on the sidelines due to stringent regulatory restrictions, major financial institutions can now seriously consider acquiring other lenders, even those holding over $100 billion in assets.

While JPMorgan Chase and Bank of America are barred from such transactions due to exceeding the 10% national deposit threshold, two megabanks have ample room to maneuver: Citigroup and Wells Fargo. As the nation’s third- and fourth-largest banking institutions, both possess sufficient capacity under the national deposit cap to target a substantial regional player, according to industry analysts, consultants, and investors.

“Two years ago, securing regulatory approval for a bank of that scale to acquire virtually any asset was impossible,” stated Brian Graham, co-founder of the advisory firm Klaros. “Today, getting a deal completed is a realistic possibility. I would be highly surprised if these institutions were not actively exploring such opportunities.”

Following a decade spent operating under regulatory constraints—Citigroup navigating consent orders and Wells Fargo facing growth caps—both institutions have successfully cleared major regulatory hurdles and are now positioned for expansion.

A major acquisition, akin to the strategic moves executed by competitor JPMorgan during past financial crises, would instantly grant Wells Fargo or Citigroup thousands of retail branches and billions of dollars in deposit inflows.

For Citigroup, which operates a relatively modest network of approximately 650 U.S. branches, such a transaction would provide a vital influx of lower-cost funding. For Wells Fargo, which already maintains an extensive branch footprint, a deal of this magnitude would enhance operational scale and unlock significant cost-saving synergies.

“There is a massive race for scale in the industry, and the clock is ticking,” noted KBW analyst Chris McGratty, highlighting the urgent need for sector consolidation. “If institutions want to make strategic moves, the current climate is the ideal window to do so.”

Although there are over 4,200 banks operating in the United States, only a select few align with the strategic acquisition criteria of Wells Fargo or Citigroup. A prospective target must be of sufficient size to significantly impact financial performance, yet small enough to ensure the acquirer remains comfortably below the 10% national deposit cap. Furthermore, ideal candidates must offer a complementary branch network, a strong cultural alignment, and high-quality deposit bases—requirements that make identifying justifiable transactions highly complex.

Applying these rigorous screening criteria highlights five regional banks that stand out as highly viable acquisition targets for either institution.

Fifth Third offers a robust commercial and retail banking engine throughout the Midwest, complemented by a rapidly expanding footprint in the Southeast. Huntington provides a highly efficient, low-cost deposit base coupled with an expanding branch network in high-growth markets such as Texas and the Carolinas.

Citizens provides dense retail and commercial coverage across affluent metropolitan areas in the Mid-Atlantic and New England regions. KeyCorp features a strong middle-market commercial business, with a geographic branch footprint stretching from the Great Lakes to the Pacific Northwest.

Finally, Regions delivers a solid retail deposit footprint across the rapidly expanding Southern corridor, including key markets in Texas and Florida.

Beyond the core group, Zions represents an ideal target specifically for Wells Fargo, offering strong commercial relationships across high-growth Western states that would seamlessly complement its existing footprint.

For Citigroup, a highly logical target is First Horizon, which boasts an attractive branch presence across the rapidly growing U.S. Sunbelt region.

Wells Fargo and Citigroup declined to comment on the potential speculation. Most of the regional banks mentioned in this report also declined to participate, with the exception of Huntington, Zions, and First Horizon, which did not respond to requests for comment.

An Open Mind on M&A

When queried in April regarding the possibility of Citigroup acquiring a large financial institution, CEO Jane Fraser stated that the bank’s primary focus remains on organic growth rather than strategic acquisitions.

Nevertheless, Citigroup executives were reportedly involved in discussions about purchasing a major regional lender to strengthen the firm’s deposit base, according to a March report by Bloomberg News. At the time, Citigroup dismissed the report as “baseless speculation,” though its shares subsequently fell by more than 4%.

For many analysts covering the firm, Citigroup is currently focused on proving that its self-directed restructuring strategy can deliver superior shareholder returns. Acquiring a large regional bank would introduce significant integration challenges, including adding branches, employees, and complex technology systems, at a time when Citigroup is striving to streamline its operations.

“A depository deal would be a major distraction” from those simplification goals, noted KBW’s McGratty.

In contrast, Wells Fargo CEO Charlie Scharf has signaled a greater openness to transformative transactions, ranging from regional bank acquisitions to credit-card platform purchases, even while maintaining a general emphasis on organic growth.

“We should always explore avenues to enhance franchise value, including strategic mergers and acquisitions,” Scharf wrote in a March shareholder letter, noting that regulators have become more receptive to consolidation.

While emphasizing that “we feel no pressure to actively pursue” a transaction, Scharf clarified that “if a highly compelling opportunity arises, we will thoroughly evaluate it.”

However, a key challenge remains: the anticipated wave of industry consolidation under the current administration has yet to fully materialize. In fact, the total value of North American bank mergers fell by more than half to $30.1 billion during the first six months of 2026, down from the previous year, according to data compiled by EY.

While regulatory barriers are indeed easing, few financial institutions are inclined to become sellers when profitability is strong and share prices continue to rise.

“Most institutions enjoy healthy profit margins and robust stock valuations, which significantly raises the threshold for any potential sale,” explained Frank Sorrentino, a mergers and acquisitions banker at Stephens. “In the current environment, virtually every bank views itself as a buyer rather than a seller.”

Activist investors, who have long pressured banks to optimize shareholder returns, report that executives are now systematically comparing the financial benefits of external acquisitions against simple share repurchase programs, fostering greater capital allocation discipline.

The Race for Regional Dominance

According to Sorrentino, the current climate remains highly favorable for mergers, describing it as “probably the best environment we’ve seen since the financial crisis.”

Over the past year, legislative and regulatory shifts have significantly lowered obstacles. Congress overturned previous restrictions on mergers at the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation reinstated its longstanding merger guidelines, effectively restoring expedited review processes and lowering the regulatory bar for clearance.

When pursuing large-scale acquisitions, Wells Fargo holds a distinct advantage over Citigroup: a stronger stock currency. This robust valuation makes transactions easier to justify financially, particularly if the target bank fills a critical geographic or product gap.

Alternatively, the path to industry consolidation may involve regional banks combining with one another.

For years, market watchers have speculated that two of the three largest super-regionals—PNC, U.S. Bancorp, and Truist—could eventually merge to form a new national banking champion capable of rivaling the top-tier giants.

According to new research shared with CNBC by the consulting firm Bain & Company, mergers among regional players are projected to create one to three new megabanks with at least $1 trillion in assets by 2030. The firm’s predictive model, spanning two decades of historical data, also forecasts that the number of regional banks will shrink from 49 to as few as 30.

“We anticipate that an increasing number of banks, particularly regional players, will leverage mergers and acquisitions to rapidly acquire critical capabilities,” Bain noted, highlighting advanced technologies like artificial intelligence as a primary driver.

This strategic imperative remains on the horizon. If Wells Fargo and Citigroup choose to stay on the sidelines, regional banks must determine whether they can afford to remain passive—or if they must merge with peers to maintain their competitive footing.

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