H&R Block Inc., the biggest U.S. tax preparer, jumped 8 percent in New York after saying it will sell its banking unit to exit Federal Reserve oversight.
The deal with BofI Federal Bank will give H&R Block $200 million to $250 million in excess capital, the Kansas City, Missouri-based company said today in a statement. The sale is expected to reduce H&R Block's earnings by about 7 cents to 9 cents a share beginning in fiscal 2015, according to the firm, which didn't disclose terms.
H&R Block said in July that it would sell its bank assets after the Fed proposed new rules requiring savings and loans to hold more capital. An agreement with Republic Bancorp Inc. collapsed in October after the Louisville, Kentucky-based firm didn't meet a condition for the purchase. H&R Block's goal is to transition to a third-party bank before the 2015 tax season, the firm said in a December investor presentation.
"This is an important step in ceasing to be regulated as a savings-and-loan holding company, which we believe is in the best strategic interests of our company and our shareholders," Chief Executive Officer Bill Cobb, 57, said in the statement.
The firm's shares had slid 2.1 percent this year before rising to $30.71 at 4:31 p.m. in extended trading.
H&R Block will be able to buy back stock without Fed approval after the bank sale, which would "lead to aggressive shareholder returns," Moody's Investors Service said in November.
BofI Holding Inc., based in San Diego, owns Bank of Internet USA, which calls itself America's oldest online bank. The firm said in a separate statement that it expects to receive $450 million to $550 million in customer deposits and prepaid card balances from H&R Block.
BofI struck a deal last year to acquire $200 million of deposits from insurer Principal Financial Group Inc. The agreement included funds from individual checking accounts and certificates of deposit, the insurer said at the time. Principal's bank operated only online and didn't have physical branches.