Union bank

US Bancorp Says Union Bank Deal On Track For H1 Close

US Bancorp said on Wednesday it was confident that its pending acquisition of MUFG Union Bank will be completed in the first half of this year, which is in line with the original timing of the deal.

Chairman and CEO Andy Cecere told analysts the $8 billion cash and stock purchase could close “later in the first half,” followed by a systems conversion at the end third trimester or early fourth trimester.

There’s “nothing to make us believe it would be any different than that, and we’re preparing for that time frame,” Cecere said on US Bancorp’s fourth quarter earnings call.

His comments come a day after the Federal Trade Commission and the Justice Department’s Antitrust Division started a review federal merger guidelines. Although the analysis does not focus specifically on banks, the industry will likely pay particular attention to them.

In an interview with American Banker, US Bancorp CFO Terry Dolan said the Minneapolis-based company isn’t overly concerned that the joint FTC-DOJ review will impact the deal with Union Bank. “It takes a long time for this process to happen,” he said.

One of the reasons America’s Bancorp, with $573 billion in assets, feels comfortable sticking with its original planned timeline: the renomination and confirmation of Jerome Powell as Fed Chairman , Dolan said. Powell, who was first named to the role in 2017, was selected by President Biden in November and confirmed for a second term of four years Last week.

“It helps keep things going,” Dolan said.

Announced in September, the deal for San Francisco-based MUFG Union Bank would significantly increase US Bancorp’s market share in California. If completed, it will be the company’s first full-bank acquisition since its takeover of more than a dozen failed banks during the financial crisis.

For the fourth quarter, US Bancorp reported net income of $1.7 billion, a 10% increase from the same quarter in 2020. The company’s earnings per share were $1.07, below from the average estimate of $1.10 among analysts polled by FactSet Research Systems.

U.S. Bancorp’s net interest margin fell to 2.4% from 2.53% in the third quarter, primarily due to a reduction in lending fees related to the Paycheck Protection Program, as well as the increased deposits and returns related to the bank’s investment portfolio.

On Wednesday afternoon, shares of US Bancorp fell 7.4% to $57.62.

Commercial loans were a silver lining during the fourth quarter. Period-end commercial loans totaled $112 billion, up 8.9% year-over-year, the company said.

The rise reflects how companies view supply chain issues, according to Dolan. “It’s moving away from a ‘just in time’ inventory management approach to ‘just in case’,” he said.

US Bank’s parent company said it expects revenue growth of 3% to 4% in 2022. At the same time, the company expects spending to increase 2% to 3%, in part because of inflation and continued investment in the business, Dolan said.

On Wednesday, US Bancorp also announced changes to its overdraft fee policies, joining a string of large and medium-sized banks that have done so in recent months.

US Bancorp revealed that it recently eliminated NSF fees on consumer checking accounts. By the end of the second quarter, the company plans to increase the amount an account can be overdrawn before incurring a fee, raising the current limit from $5 to $50. The company will also give customers a full day to deposit funds into an account with a negative balance greater than $50.

The changes will result in a $160 million to $170 million drop in annual fee revenue, the bank said. About 75% of that reduction will be realized in 2022, Dolan noted.

The moves by US Bancorp come amid pressure on banks from Biden-era regulators to reduce their reliance on overdraft fees. Wednesday, Regions Bank in Birmingham, Alabama, announced several changes including the elimination of the overdraft protection transfer fee, which will occur by the end of the first quarter, and the elimination of the insufficient funds fee by the end of the second quarter.