Mid-cap banks have a favorable setup for H2 as they are gaining momentum across three fronts: loan growth, merger and acquisition activity, and upcoming regulatory changes, UBS said in a note Friday.

Analysts, including Nicholas Holowko, said that now that most banks in the group have reported results, there is clear evidence that the first two themes, loan growth and deal activity, are already in motion, while the third, regulatory upside, is starting to gain steam.

Among the top performers in this environment are Webster Financial (WBS), Wintrust Financial (WTFC), and SouthState (SSB), which are showing some of the strongest improvements in commercial and industrial, or C&I, lending trends compared to their peers, the analysts added.

Growth has been strong in C&I lending, with year-over-year increases averaging 8%, and annualized quarter-over-quarter growth at roughly 12%, the analyst said, adding that "this sets up again for a strong H2 where expectations could prove conservative should tariff pressures continue to ease, economic prospects improve, and favorable tax benefits stemming from Big Beautiful Bill start to incentivize greater investment levels from commercial borrowers."

The analysts said that since Fed Vice Chair for Supervision Michelle Bowman's recent appointment, expectations have been growing that the thresholds for Large Financial Institution regulations could be adjusted. For some banks, this could mean fewer constraints around mergers and acquisitions.

The analysts added that nearly all banks also acknowledged improved receptiveness from regulators regarding merger activity, suggesting that early signs of regulatory change are already beginning to benefit the sector.

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