When Everyone Else Is Getting Bigger, Get Clearer
From the Zen of Banking series by Joe Sullivan, Market Insights, Inc.
JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo just posted strong second-quarter earnings. Bain & Company expects the $1 trillion club to grow from four banks to as many as seven by 2030, while the number of large regional banks could shrink by a third or more over the same period. Wells Fargo and Citigroup are reportedly the only megabanks with enough room under the national deposit cap to make a large acquisition, and the speculation about who might buy whom has already begun.
Read enough of this coverage and it starts to feel like gravity: bigger wins, smaller loses, and the only strategic question left is who gets bought and by whom. If you're leading a community bank or credit union, it's easy to look at those numbers and wonder how you're supposed to compete in an industry increasingly defined by institutions with trillion-dollar balance sheets.
I don't think that's the right way to read it. In fact, buried in the same Bain analysis is a finding that points somewhere much more interesting. Deals that combined scale with new capabilities generated total shareholder returns 14 to 18 percentage points higher than pure scale deals. Scale alone didn't win. Fit did. The most successful deals weren't simply about adding assets; they were about adding something the acquiring institution needed and didn't already have.
Santander's acquisition of Webster Financial is a good example. On the surface, you could look at it as another large bank getting larger. But what made Webster particularly valuable was underneath the balance sheet: a significant health savings account franchise that Santander didn't have. The value wasn't simply in getting bigger. It was in becoming stronger in a specific way.
That's an important distinction for community banks and credit unions watching all of this from the outside. You aren't going to out-scale the trillion-dollar banks. That fight is already decided. But scale isn't the only form of competitive advantage. Depth is one, too.
Depth can mean density in a particular market. It can mean expertise with a particular industry or kind of borrower. It can be a reputation built over decades, an unusually strong commercial banking team, or trust with a particular group of customers that a national institution can't easily reproduce. Community institutions often possess these advantages without fully recognizing them as strategic assets. They become simply "how we've always done business" rather than something worth intentionally protecting and building around.
And that depth can become especially valuable during periods of consolidation. When an acquisition closes, customers don't experience a spreadsheet or a larger balance sheet. They experience new names, new systems, new processes, and sometimes new people. Lending relationships, wealth management arrangements, and banker-client connections that took years to build can suddenly feel less certain. Some of those customers will inevitably reconsider where they bank.
That's an opening for community institutions—not because they can offer more scale, but because they can offer the depth, familiarity, expertise, and responsiveness a customer may suddenly feel they've lost. Every large transaction creates the possibility of smaller opportunities around the edges. The question is whether an institution knows its market and its own strengths well enough to recognize those opportunities when they appear.
The temptation, when the trade press is filled with trillion-dollar numbers, is to react by trying to look bigger yourself. Add products because competitors have them. Expand because others are expanding. Pursue a merger because everyone else seems to be consolidating. Invest in the latest technology because you're afraid of being left behind. But activity isn't the same thing as strategy. Sometimes all that motion actually makes it harder to see what matters.
Strategy begins with something quieter: an honest understanding of where you stand. What are you unusually good at? Where do you have credibility others don't? Which customers or markets understand your value better than anyone else? What capabilities would genuinely make you stronger—and which ones would simply make you busier?
That's part of what I mean when I talk about the Zen of Banking. Clarity before action. Simplicity in the service of strategy. Knowing what matters enough to say no to what doesn't. It isn't about resisting growth or change. It's about being deliberate enough to pursue the growth that actually fits who you are and where you can win.
None of this means consolidation isn't real or that scale pressures don't matter. They do. Deposit costs, technology investments, regulatory overhead, and the sheer pace of change all create advantages for larger institutions. Pretending otherwise would be its own kind of distortion. But that's different from saying smaller institutions are becoming obsolete.
What I think the evidence is really telling us is that undifferentiated institutions are exposed—at every size.
For community banks and credit unions, then, the opportunity isn't simply to get bigger. It's to get more precise about the two or three things you can do exceptionally well, the customers and markets where those strengths matter most, and the capabilities you need to make those advantages even stronger. Then have the discipline to invest there instead of trying to be everything to everyone.
There's an interesting lesson in the megabanks making headlines right now. They're not simply getting bigger. They're getting very specific about what they want to add and why. A community institution may never make a trillion-dollar-bank shortlist, but that same strategic clarity is available at any size.
When everyone else is getting bigger, getting clearer may be the more powerful growth strategy.
Joe Sullivan is CEO of Market Insights, Inc. He writes and speaks on demographics, growth strategy, and the intersection of leadership and mindfulness in banking — a framework he calls the Zen of Banking. Connect with him on LinkedIn or at jsullivan@formarketinsights.com.
