The effect of mergers and acquisitions on the banks' profitability

Abstract

Mergers and acquisitions, as strategies for restructuring banks aimed at growth, have been present in our banking sector for the last two decades. Most often, they were implemented in crisis conditions when the stability and profitability of certain banks were threatened. The influence of these restructuring strategies on the performance of banks is inevitable, given that banks thus strive to reduce costs, increase profits, economies of scale, market positioning, reduce competition, and satisfy the needs of clients. Through mergers and acquisitions, the privatization of banks that are part of that process was carried out to some extent. This paper analyzes the impact of mergers and acquisitions as a restructuring strategy on the profitability of individual banks in the banking sector of the Republic of Serbia. The results of the analysis on the example of AIK Bank, OTP Bank, Raiffeisen Bank, Postal Saving Bank, and NLB Komercijalna Bank for the period from 2018 to 2022 show that, after merger or takeover activities, the basic indicators of profitability recorded an increase compared to the period before the mergers and acquisition were implemented. However, the profitability of individual banks and the banking sector is influenced by numerous other macroeconomic factors.

Keywords

• bank restructuring
• mergers and acquisitions
• profitability of banks in the republic of serbia