U.S. Bancorp gives itself three more months to close MUFG Union merger

U.S. Bancorp has extended its agreement to purchase MUFG Union Bank by three months, until the end of 2022, the Minneapolis-based company said Friday.

Earlier this week, executives at the parent company of U.S. Bank said they expect the deal to close later in the second half of this year. When the $8 billion cash-and-stock acquisition was announced last September, executives projected a closing around June 2022.

The deal extension comes during a period when large-bank deals are drawing increased scrutiny and vocal pushback.

Bloomberg

Several mergers between large financial institutions have been delayed after President Biden's 2021 executive order directing federal financial regulators to reassess their processes for reviewing proposed mergers. The directive came as part of a broader executive order designed to promote competition in the U.S. economy, including in sectors such as technology, health care and agriculture.

The Federal Reserve official in charge of bank oversight, Michael Barr, said earlier this month that he is working with Fed staffers to review current merger-review processes. Bank mergers have the potential to raise prices, narrow the range of services offered and reduce the supply of small business and community development loans, according to Barr, the Fed's vice chair for supervision.

"The advantage that firms seek to gain through mergers must be weighed against the risks that mergers can pose to competition, consumers and financial stability," Barr said.

Some regulators are concerned that deals to create financial institutions with more than $500 billion of assets pose heightened risks to the financial system in the event of failure. Michael Hsu, acting Comptroller of the Currency, said this year that his agency needs banks to enhance their resolution strategies in order to receive approval.

U.S. Bancorp Chief Financial Officer Terry Dolan said Monday that his company is much less complex than a global, systemically important bank. As of June 30, U.S. Bancorp held about $591 billion of assets, and MUFG Union had almost $125 billion of assets.

"We have had resolution plans that have stood the test of time for a decade," Dolan said at an industry conference. "Union Bank doesn't really complicate that because the structure of Union Bank and what we are buying is very similar to what exists today."

There have been a number of delays during the merger-approval process in recent years. For several months in 2021, regulators didn't green-light any bank deals.

First Citizens Bancshares and CIT Group extended their merger timeline last year, citing prolonged delays in regulatory approval. The $2.2 billion deal closed in January, more than 13 months after it was announced.

M&A

U.S. Bancorp now expects MUFG Union deal to close later in second half of 2022

The Minneapolis-based buyer had previously said the deal would close earlier in the second half. Some of the financial benefits, which had been expected to be realized next year, won't come to fruition until 2024, executives said Monday.

By Jim Dobbs

September 12

Another large deal waiting for regulatory approval is TD Bank's acquisition of Memphis, Tennessee-based First Horizon. Progressive groups have asked regulators to refrain from approving the $13.4 billion deal until the banks agree to increase certain community investments.

The extension of U.S. Bank's purchase agreement will lengthen the timeline for achieving about $900 million in expense savings. U.S. Bank expects to realize between 40% and 50% of these savings in 2023, down from the 75% it initially expected, Dolan said.

The bank had initially planned to perform its systems conversion over Presidents Day Weekend in 2023. That transition is now scheduled for Memorial Day Weekend.