(Wall Street Journal) - Toronto-Dominion Bank TD 1.10%increase; green up pointing triangle and First Horizon FHN -32.42%decrease; red down pointing triangle have called off their $13.4 billion merger.
TD ran into hurdles getting regulators to sign off on the deal, announced in February 2022. The Canadian lender said it couldn’t be sure when or if it would get the necessary approvals, so the two banks decided to terminate the deal.
Shares of Tennessee-based First Horizon fell nearly 37% in afternoon trading.
The deal’s collapse comes at a precarious time for U.S. regional banks such as First Horizon. The Monday seizure and sale of First Republic Bank to JPMorgan Chase has further dented confidence in midsize lenders, battered by the March collapse of Silicon Valley Bank and New York’s Signature Bank.
Regional-bank stocks tumbled Thursday morning despite assurances from the Federal Reserve that the banking system is on solid footing. PacWest Bancorp PACW -41.26%decrease; red down pointing triangle, which has been hit hard since regional banks started wavering in March, fell 50%.
The deal would have made TD the sixth-largest U.S. bank by assets, taking it into new markets in Louisiana, Tennessee, Texas and Georgia. Canadian rival BMO Financial Group recently closed its $16.3 billion deal for Bank of the West.
TD Bank has been a target of U.S. regulators in recent years.
In 2020, the bank reached a $122 million settlement with the Consumer Financial Protection Bureau, which found it had charged customers overdraft fees for ATM and one-time debit-card transactions without obtaining their consent.
Sen. Elizabeth Warren of Massachusetts last year asked the Office of the Comptroller of the Currency to block the First Horizon deal, citing “unchecked fraud and abuse” at TD Bank. Ms. Warren said the bank had been pressuring customers to open accounts and sign up for services they didn’t need.
A TD Bank spokeswoman declined to comment in an emailed statement on the bank’s discussions with regulators. “We want to be clear that this is not in any way related to TD’s good faith dealings with our customers,” she said.
In February, TD Bank agreed to pay $1.2 billion to settle claims related to the bank’s involvement in R. Allen Stanford’s Ponzi scheme. A group of investors alleged that TD, along with other banks, provided financial services that supported and furthered Mr. Stanford’s $7 billion fraud scheme.
At the time, TD said it denied any liability or wrongdoing in the Ponzi scheme and settled to avoid the distraction and uncertainty of the lawsuit.
TD and First Horizon didn’t discuss extending the timeline for the deal, lowering the price, or changing its structure, said Bryan Jordan, First Horizon’s CEO.
“We were engaged with TD, working hand in hand to win regulatory approval and we were willing to engage in any discussions,” he said. “But it’s not relevant at this point. We signed the mutual termination.”
TD will pay First Horizon $200 million in cash on top of a $25 million fee First Horizon is due under the merger agreement, the two banks said.
The $225 million termination fee will help First Horizon boost its capital ratios, he said, adding that the bank’s total deposits have increased roughly 2% from the first quarter of 2020.
By Vipal Monga
