The looming 2020 presidential election has investment bankers uneasy that a change in the White House could threaten their M&A portfolios.
One candidate in particular has them wondering if they should speed up deal talks: Sen. Elizabeth Warren, D-Mass.
Warren has made heightened financial regulation a cornerstone of her campaign, discussing sweeping policies to tax the wealthy, redistribute wealth and break up the biggest U.S. banks. Bank M&A activity has also drawn the scrutiny of the progressive presidential candidate.
Even as she prepared to announce her candidacy for the highest political office on Feb. 9, she zeroed in on the BB&T Corp. and SunTrust Banks Inc. deal, the biggest bank merger since the 2008 financial crisis that will create the sixth-largest bank in the U.S.
Just two days before announcing her presidential run, Warren sent a letter to Federal Reserve Chairman Jerome Powell criticizing the $28.28 billion deal, calling it the "first new too-big-to-fail bank since the financial crisis."
And on Dec. 5, Warren co-sponsored a bill with Rep. Jesus Garcia, D-Ill., that would heighten scrutiny of bank M&A deals.
Warren's bank-merger bill, called the Bank Merger Review Modernization Act, would not prohibit banks from merging but instead would establish heightened regulatory hurdles to ensure that regulators do not "rubber-stamp" approvals.
The bill would give the Consumer Financial Protection Bureau the power to approve deals; only allow deals between banks that have received two "outstanding" Community Reinvestment Act scores out of three exams; and require disclosures of pre-application discussions between regulators and banks.
Christopher Olsen, managing partner of Washington, D.C.-based M&A advisory firm Olsen Palmer LLC, was having lunch with financial institution executives on a November afternoon to talk about a potential sale in the next two to four years.
The ramifications of a Warren presidency dominated the conversation, Olsen said.
"Most of the discussion over lunch was [about] potentially expediting [a sale], exactly for the reason that we're talking about," Olsen said.
The clients' questions were consistent: "If there's a political change, should we expedite or speed up the timing of a sale?"
Many in the i-banking community feel like now is the time to pursue deals because bank M&A could grind to a halt should Warren win in 2020, Olsen said.
"It's definitely on folks' minds, especially sellers," Olsen said. "I don't know if it's as much on buyers' [minds], [but] I know they're worried about it through their own bank as much as an M&A perspective."
Raymond James public policy analyst Ed Mills said that chatter about Warren's ascension has also picked up with his clients.
"They're trying to get these things done now before Elizabeth Warren is president," Mills said in an interview. "If you're going to do it, do it now, because the window is closing."
Not so fast
But Warren's plans would be difficult to implement, even if she can top both her Democratic presidential candidate rivals and President Donald Trump in 2020, according to Ian Katz, a financial regulation expert at Capital Alpha.
Should she win the presidency, she would need an overwhelming majority in the Senate and political will in the House to keep her bold proposals intact.
Further, Katz said a potential Warren presidency is unlikely to be a singular catalyst driving expedited M&A.
"[Bankers] could be concerned about ... what Elizabeth Warren could do, but I'm not sure that would make me want to do a merger [ahead of the election]," he said.
Katz also pointed out that Warren's anti-bank-merger bill would take time to implement, and Trump-appointed regulators such as FDIC Chair Jelena McWilliams and Powell could stay in their seats well into Warren's first term.
Furthermore, Warren's meteoric rise in the polls has leveled off. Warren trails former Vice President Joe Biden by 14 percentage points and Sen. Bernie Sanders, I-Vt., by 5 percentage points, according to a recent Morning Consult poll.
Still, Olsen said would-be sellers are calculating whether they should speed up the timing of potential deals depending on who may take the Oval Office.
"If it shifts Democratic, there's questions on some sellers' minds: 'What does that mean for valuations, for M&A activity, for [regulations]?'" Olsen said. "It's much more profound [for] some of the front-runners, especially Elizabeth Warren."
Warren and her campaign did not respond to requests for comment.