Bank mergers will 'absolutely' accelerate thanks to regulation rewrite, predicts analyst Mike Mayo

  • Expect some smaller banks to get bigger now that changes are in the works for Dodd-Frank, Wells Fargo analyst Mike Mayo says.
  • The Senate passed a bill Wednesday that eases regulations on all but the largest banks.

Expect smaller banks to get bigger now that changes are in the works for the Dodd-Frank financial regulations, Wells Fargo analyst Mike Mayo told CNBC on Friday.

The Senate passed a bill Wednesday that eases regulations on all but the largest banks. Its fate now rests with the House.

If those changes happen, "we absolutely expect bank consolidation to accelerate," Mayo said in an interview with "Closing Bell."

One of the main provisions would raise the threshold for banks to be considered so vital to the financial system that they must be subjected to extra oversight and submit to mandatory annual stress tests. The current asset level is $50 billion, and the bill would raise that to $250 billion.

"That would allow banks to get bigger without the risk of having all sorts of additional oversight," Mayo said.

In recent years, bank mergers have been rare as companies tried to avoid surpassing the asset-size threshold.

"You also have scale mattering more than ever in banking so there's a reason to get bigger," Mayo added. "And also you have extra capital."

He's not the only one on Wall Street betting on consolidation in the sector.

"In the past, banks were wary to cross the $50bn asset marker," said Barclays analyst Jason Goldberg in a note Thursday. "We think this threshold now increases to $100bn."

— CNBC's Liz Moyer contributed to this report.