U.S. Bancorp buying MUFG Union Bank for $8 billion

In what would be the latest tie-up of regional banks, U.S. Bancorp in Minneapolis is acquiring MUFG Union Bank in San Francisco for $8 billion in cash and stock.

The deal, announced early Tuesday, would add roughly $58 billion of loans and $90 billion of deposits to U.S. Bancorp’s balance sheet, significantly boosting the bank's market share in California. The $547.8 billion-asset parent of U.S. Bank has the No. 10 deposit share in the nation’s largest state and would move to the No. 5 position when its deal for MUFG Union Bank is completed in the first half of 2022.

“The acquisition of MUFG Union Bank underscores our commitment to strengthen and grow our business on the West Coast , make investments to serve customers and local communities and enhance competition in the financial services industry. With MUFG Union Bank , we will increase access to state-of-the-art financial products while maintaining U.S. Bank’s strong track record of putting its customers and communities first,” Andy Cecere, U.S. Bancorp’s chairman, president and chief executive officer, said in a news release Tuesday.

MUFG Union Bank’s owner, Japanese banking giant Mitsubishi UFJ Financial Group, had reportedly been exploring a sale of its U.S. operations as banks of all sizes look to pair up with rivals to try to keep pace with the likes of JPMorgan Chase, Bank of America and Wells Fargo and use cost savings from mergers to invest in technology.

The deal would mark the latest retreat from the U.S. by foreign-owned companies. Earlier this year, PNC Financial Services Group in Pittsburgh acquired the U.S. operations of Spain’s Banco Bilbao Vizcaya Argentaria for about $11.6 billion and HSBC announced it is selling the bulk of its U.S. retail operations to Citizens Financial Group in Providence, Rhode Island.

Bank Leumi Le-Israel BM is also considering selling its New York-based U.S. operations.

For U.S. Bank, the deal would be its first whole bank acquisition since it bought more than a dozen failed banks during the financial crisis.

In a news release, U.S. Bank said it would pay $5.5 billion in cash and 44 million shares for the $133 billion-asset MUFG Union Bank. The deal price is equal to about 1.3 times MUFG Union Bank’s tangible book value, slightly below the median of 1.4 times book value on bank deals announced so far this, according to data compiled by Bloomberg.

U.S. Bank said it expects the deal to be 6% accretive to earnings in 2023 and 8% accretive when the merger is fully integrated.

U.S. Bank also said it expects to reduce the combined company’s annual expenses by about $900 million, through a combination of branch and real estate consolidation, technology and systems conversion and other back office efficiencies. U.S. Bank has more than 460 branches in California and MUFG Union Bank has about 280, according to the Federal Deposit Insurance Corp.

Though U.S. Bank is likely to shutter many overlapping branches to cut costs and improve efficiency, it said in a news release that it is committed to retaining all of MUFG Union Bank’s front-line branch employees.

U.S. Bank expects to incur merger charges of $1.2 billion.

The deal’s announcement comes just a day after MUFG Union Bank revealed that it was hit with a consent order from the Office of the Comptroller of the Currency for failing to comply with information technology security guidelines from federal regulators.

U.S. Bank said it incorporated the regulatory matter into its decision and believes it can “successfully remediate the issues.”

“The order will not restrict U.S. Bancorp’s ability to operate and grow its business as planned,” it said Tuesday’s news release.

Goldman Sachs advised U.S. Bank on the deal and Simpson Thacher & Bartlett served as its legal counsel.