For top Wall Street firms, one great hope for the year 2011 is the M&A market. Executives are counting on more deal activity to offset continuing revenue weakness in other areas, notably trading. So far, the great hope seems to be materializing. We've seen some big deals, and possibly some bidding wars emerge.

But when it comes to bank deals, the market has been somewhat disappointing. Bank of Montreal struck a deal to buy Marshall & Ilsley for $4.1 billion, offering a large premium in December, but overall, the pace of deals has fallen short, according to Reuters. Deal volume in the U.S. banking sector dropped to $16.1 billion last year, down from $56.2 billion in 2009.

The big question of course is whether that will reverse course. Investment bankers focused on financial firms are hopeful, noting ripe consolidation conditions. Revenues are under pressure, and expenses need to come down significantly. "Any time we've had those kinds of circumstances, there has been M&A--and a lot of it," one banker tells Reuters.

In addition, the recent stress tests by the Federal Reserve may have added some clarity for investors and paved the way for alternative uses of capital. The upside may be limited by the fact that none of the big four consumer banks seem to be positioned for anything transformative. But hopefully we'll see more strategic deals, fill-in deals and big regional deals.

For more:
- here's the article

Related Articles:
Wachovia, Wells Fargo integrate IT
Will SOA save bank mergers?
Often overlooked consumer implications of mergers
What to make of the merger market