Does bank expertise in identifying productive projects affect economic structures? Using the U.S. interstate banking deregulation of the 1980s as a quasi-natural experiment, we find that deregulation facilitated the convergence of economic structures across states. This effect is particularly pronounced among state pairs with significantly different pre-deregulation economic structures or when one state depends on external finance while the other is more financially developed. We then develop a general equilibrium model with imperfect searching and matching between banks and firms. Calibrated to U.S. data, banks’ merger and acquisition activities penetrating new markets account for approximately half of the observed convergence of economic structures between service- and manufacturing-dominated states following deregulation. While deregulation improves social welfare, banks may deviate from the socially optimal level of entry, either under- or over-penetrating markets, because of congestion externality and banks’ market power.