Two Insider Intelligence banking predictions that came to fruition in 2020

• Insider Intelligence looked back at its banking industry predictions for 2020.
• And it was right on two predictions regarding major bank M&A and neobank profitability.
• Insider Intelligence publishes hundreds of research reports, charts, and forecasts on the Banking industry with the Banking Briefing. You can learn more about subscribing here.

At the end of 2019, Insider Intelligence made five predictions about what the coming year would hold for the banking industry. Of course, the onset of the coronavirus pandemic in Q1 put global banks to the test and defied our expectations for the future. As 2020 comes to a close, we’re revisiting our predictions to see how they held up against a year that no one saw coming.

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Here are the two predictions that came to fruition in 2020:

• M&A activity minted one new top 20 US bank by total assets. Following the historic merger between BB&T and SunTrust in 2019 that created Truist, the sixth-largest bank in the US by assets, we expected additional players to take the plunge and join the top 20 ranks. But the pandemic put most M&A plans on ice, as banks quickly pivoted to aiding customers through the crisis. Momentum returned over the summer, culminating in PNC’s November announcement that it would acquire BBVA’s US arm for $11.6 billion, in one of the biggest bank mergers since the 2008–2009 financial crisis. The combined entity will boast over $559.50 billion in consolidated assets and supplant U.S. Bank as the fifth-largest US bank by assets, per September 2020 Federal Reserve data. At the same time, regional consolidation picked up in the second half of 2020 as smaller players look to leverage each other’s branch networks and scale to invest more significantly in technology: First Citizens and CIT announced a merger in October, while Huntington and TCF did so last week. More banks will likely follow their lead in the new year, as banks refocus away from pandemic triage and toward finding cost synergies and strengthening their market positioning.
• A major consumer-focused neobank became profitable—but we’re still waiting to see the impact on investor expectations for competing players. We were also right in pegging UK-based Starling as the winner of the race to profitability, as it crossed the finish line in November. Although CEO and founder Anne Boden warned that the neobank’s plans to break even by the start of 2021 could be pushed back due to the pandemic, it turned out to be a driver of Starling’s success: The neobank quickly became an accredited lender under the UK government-backed relief programs for small businesses, and rolled out a number of digital tools to further aid businesses. As a result, Starling’s total business accounts more than tripled year over year. Beyond driving revenues and customer acquisition, the moves boosted Starling’s standing in the UK business banking space and set the stage for the neobank to maintain valuable long-term relationships. The latter half of our prediction around neobank profitability—that investors will sour on neobanks that aren’t showing signs of being able to turn a profit in the relatively near future—is still to be determined. Now that Starling has proven that profitability is viable for neobanks, it could establish expectations and a standard to which other neobanks are held—and investors may start pushing other neobanks for clear evidence of future profitability.

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