US Bancorp to Acquire MUFG Union Bank in $ 8 Billion West Coast Campaign

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US Bancorp

said on Tuesday it would gain a foothold in the west coast retail banking market with an $ 8 billion cash and stock deal to buy MUFG Union Bank’s main regional banking franchise.

Actions in

US Bancorp

(ticker: USB) was up 1.3% at midday, while US-listed stocks of

Mitsubishi UFJ Financial Group

(MUFG) —the owner of MUFG Bank — advanced 2%.

The $ 8 billion deal includes $ 5.5 billion in cash and approximately 44 million US Bancorp common shares.

The acquisition will allow US Bancorp to focus on the retail banking markets in California, Washington and Oregon, where MUFG Union Bank has more than one million retail customers and serves approximately 190,000 small businesses. The agreement excludes MUFG Union Bank’s merchant and investment banking operations, as well as certain other middle and back-office functions.

MUFG Union Bank also has some $ 58 billion in loans and $ 90 billion in deposits on its balance sheet as of June 30, the groups said, and the combination will improve US Bancorp’s deposit position among California’s 10th largest retail banks. on the fifth.

“The acquisition of MUFG Union Bank underscores our commitment to strengthen and expand our West Coast business, invest to serve customers and local communities, and strengthen competition in the financial services industry,” said Andy Cecere, president, ceo and chairman. from US Bancorp, in a statement.

The acquisition of US Bancorp marks a wave of financial mergers over the past year, as banks and other financial institutions clamor for scaling up to stay competitive with big banks.

Citizens Financial Group

(CFG), for example, snatched up Investors Bancorp as well as

HSBC Holdings

‘(HSBC) Operations on the east coast. Based in Buffalo, NY

M&T Bank

announced its intention to acquire

People’s United Financial

(PBCT).

In Tuesday’s deal, MUFG will take a 2.9% minority stake in US Bancorp. MUFG said the deal will allow it to focus on other areas such as merchant and investment banking, global markets and Japanese banking activities.

Analysts were generally optimistic about the deal.

“The agreement increases the orientation of USB towards an attractive market with household income and household income growth above the national average, as well as large segments of addressable customers, notably affluent households (12% of the US total of 7 million) and small businesses (13% of the US total of 33mn), ”Wolfe Research analyst Bill Carcache wrote on Tuesday. It maintains its Outperfrom rating on stocks as well as a price target of $ 73.

Wall Street also didn’t seem bothered that MUFG received a consent order Monday by the Office of the Comptroller of the Currency for “unsafe or unwise practices” in its operations. The bank is said to have already started processes to correct these problems.

“The company believes that it can successfully resolve the issues applicable to MUFG Union Bank in connection with the transaction, and that the order will not limit USB’s ability to operate and grow its business as planned,” said Tuesday John Pancari, analyst at Evercore ISI. . He values ​​InLine stocks with a price target of $ 61.

Write to Jack Denton at [email protected]