European banks have spent the last few years quietly getting rich. Now Goldman Sachs is making the case that all that accumulated wealth is about to reshape the continent’s banking landscape through a sustained wave of mergers and acquisitions.

In a report dated June 9, Goldman Sachs laid out what amounts to a simple thesis: European banks are more profitable than they’ve been in a decade, they’re generating capital faster than they can deploy it, and the most logical next move is consolidation. The rationale for M&A, the bank argues, is only getting stronger.

The numbers behind the merger push

Return on equity across the sector has nearly doubled over the last decade, fueled by elevated interest rates and aggressive cost-cutting programs.

Since 2022, top European banks have returned over $300B to shareholders through dividends and buybacks. Goldman Sachs projects that European banks will generate more than $500B in excess capital within the next three years.

European banking M&A announcements hit a record $27B as of early 2025, according to Oliver Wyman data. That figure nearly doubled the pace from the prior year. Goldman expects that momentum to carry well into 2026 and beyond.

The deals making headlines

UniCredit has been pursuing Commerzbank, a deal that would create one of Europe’s largest banking groups. The Italian lender’s cross-border ambitions have drawn both attention and controversy, particularly from German politicians who remain wary of foreign ownership of domestic banking assets.

Meanwhile, BBVA has been pushing its bid for Banco Sabadell in Spain. Beyond those headline deals, a steady stream of smaller transactions has been flowing through Italy and the UK.

The cross-border problem that won’t go away

Cross-border banking mergers in Europe remain stubbornly difficult. The German government initially resisted the UniCredit-Commerzbank deal, viewing it as an unwelcome foreign incursion into a national champion. Goldman’s report acknowledges this reality even as it argues the overall case for consolidation is strengthening.

Most of the current M&A wave has been domestic. Banks are merging with rivals in their own countries, where regulatory approvals are simpler and political resistance is lower. Cross-border deals remain the exception rather than the rule.

What this means for investors

Banks actively pursuing M&A, like UniCredit and BBVA, are signaling confidence in their own financial position and a belief that scale matters more than ever in a competitive market.

Smaller European banks with attractive deposit bases, strong regional market positions, or undervalued loan books become increasingly appealing as potential acquisition candidates. When $27B in deals is already on the table and $500B in excess capital is projected over three years, the math favors more consolidation, not less.