Survey of 300 institutional investors finds increasing skepticism in the financial services industry, with limited upside to current valuations 

Increased scrutiny of management and shareholder activism expected following recent bank collapses

 Consolidation expected to accelerate; investors want M&A to be accretive in the first three quarters

June 27, 2023, New York, N.Y. – Financial services companies need to prepare for a wave of shareholder activism and industry consolidation, according to a survey of institutional investors released today by Edelman Smithfield, a global financial communications firm that specializes in the financial markets and strategic situations.

Edelman Smithfield’s investor pulse research, "Unlocking Value in Financial Services,” examines investor sentiment and perspectives on the sector regarding valuation, the merger and acquisition (“M&A”) environment, trends in shareholder activism, and views on capital allocation strategies.

“In recent months, the financial services sector has seen immense change and volatility, causing investors to reevaluate their perceptions and expectations of financial services companies,” said Hunter Stenback, Senior Vice President of Strategic Situations and Investor Relations at Edelman Smithfield. “Despite a pullback in valuations, our research indicates that many investors still believe financial services companies are overvalued at current levels. In addition, our survey results align with the increase we’re seeing in management scrutiny and shareholder activism. As a result, it is more critical than ever for companies to clearly articulate drivers of valuation upside to an increasingly skeptical shareholder base.”

Ted McHugh, Edelman Smithfield's Head of Strategic Situations and Investor Relations, said, “With industry consolidation expected to accelerate, our findings show that M&A can be a path to unlocking additional value. Companies should prioritize accretive deals that enhance business diversification, while ensuring they maintain a healthy balance sheet in the current environment.”

The research surveyed 300 institutional investors,100 each from the US, UK, and continental Europe (France, Germany, and Switzerland), between May 2, 2023 and May 12, 2023. Of the firms represented by investors, 50% have $50 billion or more assets under management.

Notable highlights from the investor pulse research include:

Investors see limited near-term valuation upside.

Eighty-seven percent of institutional investors believe financial services companies are overvalued or fairly valued at current valuations. Only 13% of investors believe financial services firms are undervalued.

Companies need to prepare for an increase in shareholder activism.

Seventy-three percent of investors expect shareholder activism to increase over the next 12 months within the financial services sector. Seventy-three percent of investors also say they are frequently inclined to support activists.

As industry consolidation accelerates, deals must be immediately accretive.

Nearly three in four investors expect more consolidation in the financial services industry over the next twelve months compared to historical levels. Seventy-three percent of investors expect M&A to deliver increased profitability within the first three quarters, and 93% say within the first year.

Business diversification should be a core component of a company’s strategy.

The number one consideration for investors evaluating an investment in the financial services sector is diversification of revenue streams. When assessing M&A, investors identify deals designed to diversify a company’s geographic footprint or diversify a company’s capabilities as the most valuable acquisitions in the current environment.

Investors value balance sheet strength in the current environment above all else.

Thirty-nine percent of global investors and 42% of US investors say paying down debt is the best use of capital for financial services firms, ranking above share buy-backs, M&A, dividends, and organic growth investments. While investors expect more M&A and view it as a potential driver of valuation upside, companies should prioritize the balance sheet first.

About Edelman Smithfield

Edelman Smithfield is a financial communications boutique that specializes in the financial markets and strategic situations with the full reach and resources of Edelman. The Edelman Smithfield team comprises approximately 250 advisors across more than 25 cities and 15 countries serving an expansive roster of top organizations around the world.


Media Contacts

Hunter Stenback

Senior Vice President


Nicole Harlowe

Vice President