M&A momentum is building, even among larger banks that have been sidelined for years.

Sluggish loan demand, depressed revenue, higher compliance costs — the pressures prompting larger banks to act are the same ones that already have spurred smaller banks to do mergers and acquisitions in greater numbers.

Other factors include restrictions on dividends and share repurchases, excess capital and increased confidence in asset quality.

While the largest U.S. commercial banks — Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — are out of the merger business, "the time is ripe for other large banks, including Canadian and Japanese, to get back in," says Fred Cannon, director of research for Keefe, Bruyette and Woods.

Bernstein analysts also anticipate an increase in merger activity, mostly for banks with less than $50 billion of assets.

They pointed out in a research note that October was the busiest month for bank mergers since June 2011 in terms of total deal value.

A handful of major deals also made for a busy year overall. The long-delayed M&T Bank Corp. deal for Hudson City finally won regulatory approval — which many interpreted as a favorable sign. Announcements came from KeyCorp that it would buy First Niagara Financial Group and from New York Community Bancorp that it would buy Astoria Financial. Closings went through for BB&T's acquisition of Susquehanna Bancshares, Royal Bank of Canada's acquisition of City National and CIT Group's acquisition of OneWest.

These kinds of large transactions had been relatively rare since the financial crisis.

But now mergers are a viable option for growth among the larger regionals once again, says Cannon. Size remains a limiting factor, but is no longer a reason for a freeze on M&A.

Several years ago, both Capital One and PNC Financial Services Group did relatively large deals that grew their assets to almost $300 billion, he says. "I think the rest of the banks can make acquisitions depending on: 1. How clean the buyer and seller are (buyer is more important); 2. How big the resulting bank is."

It's still unclear what size deal would cause the Federal Reserve to balk, Cannon says. "Would the Fed approve an acquisition where the combined entity would be greater than $300 billion? $400 billion? $500 billion? Probably not above $500 billion."

But under that $500 billion bar, Cannon expects to see a lot of M&A activity going on in the coming year.

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