Union bank

Community groups refuse to back US Bank-Union Bank deal – for now

Key community groups told regulators on Tuesday they did not yet support the impending acquisition of MUFG Union Bank by US Bancorp, as they engage in negotiations to establish a series of tangible public benefits.

The groups spoke at a public hearing on the deal, a rare event that reflects that the $8 billion acquisition is among the largest since the 2007-09 financial crisis.

US Bancorp CEO Andy Cecere told the hearing that details were still being finalized on what would be the biggest community benefits deal in history – with a plan to invest some $100 billion dollars in communities over five years. This amount would be to go past the $88 billion commitment that PNC Financial Services Group made last year as part of its acquisition of BBVA USA.

But several community leaders in California – where San Francisco-based Union Bank has most of its branches – said they would oppose the merger until they see a finalized deal on community benefits. .

These agreements, also known as ACAs, typically include commitments to lend and invest in low- and moderate-income communities.

“Competition will be reduced with this merger,” said Kendra Noel Lewis, executive director of the Sacramento Housing Alliance, who added that unless banks agree to increase their lending and affordable housing commitments in California, the group will refuse support.

Kevin Stein, deputy director of the California Reinvestment Coalition, said his group and 66 of its partner organizations “will oppose this merger unless US Bank commits” to a detailed plan to increase its investments in communities and avoid branch closures in communities of color and rural areas.

“We thank US Bank for continued discussions regarding a CBA, but no such agreement is in place,” Stein said.

The Union Bank acquisition would give Minneapolis-based U.S. Bancorp a bigger West Coast presence and make it the nation’s seventh-largest bank holding company by assets. The footprint of Union Bank branches in California, Oregon and Washington State overlaps that of US Bank.

Cecere said the deal will “promote competition” and that US Bank will be “far from the largest bank in the country or even in California”, being much smaller in size than rivals such as JPMorgan Chase and Wells Fargo. .

Several other community and economic development groups said they supported the deal and praised the banks for their work. These organizations included Southern Nevada Neighborhood Housing Services; the African-American Alliance of CDFI CEOs, who lead community development financial institutions; and Mercy Housing, a Denver-based affordable housing nonprofit whose CDFI lends to smaller groups across the country.

“US Bank is highly valued in our affordable housing community for the work it does every day,” said Mercy Housing President and CEO Ismael Guerrero.

The owner of MUFG Union Bank, Japanese banking giant Mitsubishi UFJ Financial Group, is selling its U.S. retail bank to focus more on U.S. corporate and investment banking.

The Federal Reserve and the Office of the Comptroller of the Currency announced the virtual town hall meeting last month, a step that community groups said was necessary. House Financial Services Committee Chair Maxine Waters, D-Calif., called for more public hearings on major mergers.

Before regulators approve a merger, they should require a “forward-looking engagement that clearly demonstrates significant public benefits,” said Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, during the hearing. of Tuesday. He thanked Cecere and other U.S. Bank officials for their engagement with community groups, telling regulators the talks have been “productive, but not yet resolved.”

Reba Dominski, head of social responsibility at US Bank, said the bank was “aware that it took time.”

But she said the longer timeline was “intentional” and the product of a decision “to hear all voices and points of view”, noting that the bank held listening sessions with more than 200 community leaders.

Union Bank and US Bank “have been long-time leaders in serving communities, but we can do even more” through the proposed acquisition, Dominski said.

“With size comes the ability to scale,” she said. “In our plan, we will not just bring the two entities together. We will significantly increase community investments.”

During the hearing, US Bank executives outlined several elements of the community benefits agreement that has yet to be released. Cecere said the bank is “committed to retaining all front-line branch employees across Union Bank’s footprint” and that the minimum base hourly wage will increase from $15 to $18 plus. later this year for all US Bank employees, including those who would join Union Bank.

He also said that US Bank is “committed to remaining in all markets currently served by Union Bank.”

“There will be no branch closures in LMI communities or majority-minority census tracts in California that would drive US Bank out of a community,” Cecere said. “In fact, we intend to open new branches in IMT and majority minority communities.

U.S. Bank’s Dominski said the plan will set “significant lending and investment goals nationally and in California,” focusing on communities of color as well as areas where residents have income. low and moderate. These commitments will include investments in small businesses, affordable housing, environmental projects and supplier diversity initiatives, she said.

She also said the plan will include a “governance and accountability model to deepen two-way dialogue” with community groups, but did not share further details.

US Bank said it would commit to having half of its management made up of members of underrepresented groups over the next five years. While it’s unclear what the comparable numbers are today, the company website claims that 84% of its “senior executives” are white, 9% are Asian, 2.4% are African American, and 2.8% are Hispanic or Latino. About 32% of the company’s senior executives identified as women.

Sherri Jackson, mortgage broker and president of the Los Angeles-based Multicultural Real Estate Alliance for Urban Change, told the hearing that “the pandemic has devastated our community.” The group of real estate professionals was founded in 1992 after Rodney King was beaten by police and the riots that followed.

Jackson urged the U.S. Bank to increase its investments in affordable housing, pointing to rising homelessness in the area, tenant evictions and the difficulty many residents have in getting mortgages, in part because of existing housing programs with “exhausting” credit score requirements.

“It’s a crisis we’re in right now,” Jackson said. “I have been in business for over 30 years. I have never seen anything like it.