TD, BMO push back their timelines for closing M&A deals

As TD Bank Group and BMO Financial Group both continue to await regulatory approval for their pending purchases of American banks, the two Canadian banks pushed back their timelines for closing the deals.

TD now expects its acquisition of First Horizon Corp. in Memphis, Tennessee, to close by the first half of its 2023 fiscal year, which started in November. The company's prior guidance indicated the deal would close in the first quarter of the fiscal year.

"We don't control the timing of all the regulatory approvals, but we are confident that we'll get closing within the timeline that we've put out," TD Chief Executive Bharat Masrani told analysts Thursday during a quarterly earnings call.

The $13.4 billion deal, announced in February, would expand the Southeast footprint of the company's U.S. subsidiary, TD Bank.

TD had until Nov. 27 to finish the acquisition before the price tag increased by 65 cents per share. If the transaction does not close by Feb. 27, either party has the right to terminate it, though that deadline can be extended by three months under certain conditions.

Meanwhile, BMO executives pushed back the targeted closing of that bank's $16.3 billion deal for Bank of the West in San Francisco. They said they expect the deal to close in the first quarter of 2023, while leaving some wiggle room on the timing.

"We're saying first quarter of 2023. Is it first fiscal quarter or first calendar quarter? We don't know," BMO Chief Executive Darryl White told analysts during the company's quarterly earnings call. BMO's fiscal year also starts in November.

White previously estimated the acquisition would close by the end of 2022. On Thursday he said that BMO is "rounding third base and everything is occurring the way we thought it would."

Earlier this week, BMO announced an agreement with U.S. community groups on a $40 billion community benefits plan.

Both deals are pending as U.S. regulators take a tougher tone on larger mergers. Earlier this week, State Street pulled the plug on its deal for Brown Brothers Harriman Investor Services, blaming regulatory issues.

At a hearing organized by federal regulators in August, TD faced criticism from some community groups, with critics pointing to disparities in the company's mortgage lending data.

On Thursday, one analyst asked whether the TD-First Horizon deal is facing additional regulatory scrutiny, and whether TD expects to make changes to its products or fees as a result of the merger. Masrani responded that he's "not aware of anything" along those lines.

TD has previously battled with the Consumer Financial Protection Bureau over its overdraft charges, leading to a $122 million settlement in 2020.

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It has since announced several changes to its overdraft program, including by raising the threshold for when an overdraft applies, decreasing the number of times that a consumer can incur an overdraft in a day and launching a no-overdraft account. The bank has traditionally been more reliant on overdraft revenues than others its size.

Masrani brought up the overdraft changes in his prepared remarks, saying that TD's U.S. retail bank nonetheless "delivered record earnings." That shows "the bank's ability to continue to adapt as the market evolves," Masrani said.