Huntington and TCF agree to merge; community banks' boffo year

Receiving Wide Coverage ...

Regional merger

Huntington Bancshares and TCF Financial have agreed to merge, “the latest in a recent string of regional-bank tie-ups.” The all-stock deal “would be one of the larger recent bank combinations, valuing Detroit-based TCF at nearly $6 billion, or about an 11% premium. Columbus, Ohio-based Huntington has a market value of $13 billion. Together, the banks would have about $170 billion in assets, with a network of branches around the country that is especially concentrated in Midwestern states such as Illinois and Michigan.”

"The Huntington brand will survive, while the TCF name will disappear. The merger means that another purely Michigan-based bank will lose its identity," the Detroit Free Press notes, adding that the decision to maintain "two headquarters for different operations in a unique commitment to Detroit and Michigan."

Huntington CEO Steve Steinour "has known TCF Chairman Gary Torgow for years [and that] the two began talking about a deal just a few weeks ago," the Columbus Dispatch reports. "I think of this as a win. It's not something we had to do. I like their team and I like what they do," Steinour said.

The deal could “accelerate the pace of regional bank consolidation,” American Banker said.

Christmas present

A week after the Bank of England gave U.K. banks the green light to resume dividend payments, “Europe’s top financial regulators are putting the finishing touches to new recommendations allowing the region’s strongest banks to restart dividend payments within strict limits, ending a nine-month hiatus imposed due to the coronavirus crisis. The European Central Bank’s supervisory board, which oversees the 117 biggest banks in the eurozone, plans to announce the conditions under which it will accept some lenders restarting their dividend payments after its meeting on Tuesday.”

“Three people briefed on the discussions said the ECB was preparing to propose stricter limits on banks’ renewed dividend payments than those outlined by the Bank of England, which lifted its ban on shareholder distributions in the sector last week. The ECB ordered eurozone banks to stop all dividends and share buybacks to conserve €30 billion of capital in March, shortly after the pandemic arrived in Europe. Since then, the sector has lobbied hard for stronger banks to be allowed to resume payouts early next year.”

“It appears likely that the ECB will trust national regulators to use discretion” and allow banks to resume dividend payments, a Bloomberg analysis says. “There’s no reason why it couldn’t do similar on bonuses, as long as they’re packaged appropriately. If Europe’s strongest banks are held back from retaining key performers or rewarding shareholders by overly zealous regulators, U.S. banks will continue to take advantage.

Wall Street Journal

It was a very good year

This year was “the best year ever” for community banks, “largely thanks to government money that passed through banks on the way to households and businesses. Stimulus and unemployment checks boosted deposits and kept borrowers from falling behind on their loans. The Paycheck Protection Program—the government’s small-business bailout—brought them new customers and kept old ones afloat.”

Urge to merge

State Street and UBS “are in talks to merge their asset-management businesses.” State Street had earlier hired Goldman Sachs to review the options for its State Street Global Advisors investing business and “concluded the business needed to get bigger to remain competitive.”

“Buying a rival, however, wouldn’t be easy. Capital rules regarding large U.S. banks limit how much State Street could spend. Pursuing a joint venture with another firm emerged as the preferred path forward, the executives believed, and State Street reached out to several potential partners, including UBS.”

Too hot to handle?

Point-of-sale lender Affirm, which “was expected to fetch a valuation of as much as $10 billion, is postponing its initial public offering.” The company, “which offers online shoppers the ability to pay for goods in installments through short-term loans, had been set to begin marketing its shares to investors this coming week ahead of a December listing, now won’t go public until January at the earliest.”

“While the reasons aren’t entirely clear, people familiar with the matter cited the extreme first-day pops [last] week in the shares of DoorDash and Airbnb and delays at the Securities and Exchange Commission amid a flood of listing requests.”

Valuing bitcoin

“Bitcoin enthusiasts agree the digital currency hit a record recently. What they don’t agree on is the level of that milestone or even when it was set.”

“The fractured marketplace has prompted the introduction of a new crop of tools to help investors track the burgeoning, volatile industry. Since bitcoin exploded in popularity again this fall, S&P Dow Jones Indices has said it would create cryptocurrency indexes. Other firms have launched a bitcoin-volatility index and a tool that aims to be the Bloomberg screen of the crypto industry.”

Big Apple flight

Goldman Sachs, which reportedly is considering moving some of its asset management business out of New York City, possibly to Florida, may have some company in leaving the Big Apple. “Deutsche Bank could move as many as half its 4,600 Manhattan staff to smaller U.S. hubs in the next five years, the lender’s U.S. head told the Financial Times, underlining the threat to New York’s dominance as a corporate center in the aftermath of the pandemic.”

Christiana Riley, CEO for Deutsche in the Americas, “who is also a member of Deutsche’s management board, said that the New York headcount could ‘conceivably’ be cut in half within five years, depending on the evolution of ‘smaller hubs and pockets.’ She said she expected banks to concentrate people in several hubs, mostly in lower-cost areas of the country, rather than embracing the ‘work from anywhere’ model offered by some technology companies.”

Class action

Mastercard “faces the prospect of a £14 billion High Court lawsuit brought on behalf of 46 million consumers” in the U.K., claiming that the company’s interchange fees violate European Union competition law.

“The highly anticipated Supreme Court judgment, which was published on Friday, allows former financial ombudsman Walter Merricks to bring the case. Mr. Merricks’ case is the first mass claim to be launched under the Consumer Rights Act 2015, which compensates consumers for unlawful anti-competitive behavior. Lawyers said it is likely to encourage other large-scale litigation against big business.”

Washington Post

PPP 2.0

“Ongoing revelations about how big businesses and chains were able to secure hundreds of millions of dollars in funding from the Paycheck Protection Program are shaping discussions in Congress about which employers should be eligible if another $300 billion is approved under another proposed stimulus package. The diverging fortunes ― of larger employers that reaped PPP money despite perhaps not needing it, and of smaller ones that ran out of it and are struggling ― have put pressure on congressional leaders to rework the program’s rules should it approve another $300 billion pot of funds.”

“Two leading senators on small-business issues, Marco Rubio, R-Fla., and Ben Cardin, D-Md., agree that a new round of funding should permit businesses to receive a second PPP payment. More funding would also likely require businesses to show that they’ve lost income due to the pandemic to receive loans, which turn into grants if used properly.”