With Huntington Bancshares’ acquisition of Michigan’s TCF Financial, the M&A market put an exclamation mark on 2020.
The deal will create a regional bank with $168 billion in assets, $117 billion in loans, and $134 billion in deposits. That would nudge post-merger Huntington into the top 20 banks in the country by asset size.
The Huntington/TCF merger is one of three regional bank deals in the second half of the year. PNC Financial announced its acquisition of the U.S. operations of Spain’s BBVA in November, and First Citizens Bancshares agreed to buy CIT Group in October.
“Regional banks are realizing that the big four are tougher and tougher to compete against…without that scale,” said Kirk Hovde, head of investment banking and managing partner with Chicago’s Hovde Group. Technology and compliance costs have long topped lists of factors driving bank sales, especially at the community bank level.
While the deal itself is unlikely to inspire a wave of new deals, “the merits of why they came together will spark M&A,” Hovde said. Interest rates are likely to remain near zero, with accompanying NIM compression, for the foreseeable future, Hovde said. Boards and management have continued to age, exacerbated by the added stresses of a global pandemic. Plus, many of the deals put on hold because of the pandemic are likely to come back on line in 2021 as the health crisis abates.
Banks and the wider economy, however, still need to make it through this winter until vaccines are more widely distributed. Restrictions are still putting a damper on businesses in many parts of the country. Hovde estimated that M&A would pick up in the second half of 2021 and accelerate into 2022.
The combined company’s commercial banking business will be based in Detroit, where TCF has been in the process of constructing a new headquarters building that will house about 800 employees once completed. Columbus, Ohio will serve as the center of consumer banking after the deal closes, which could happen as soon as second quarter 2021.
The move comes just over a year after TCF closed its acquisition of Chemical Financial, something that almost doubled then Minnesota-based TCF’s size (the company relocated to Detroit as part of the merger).
“We had complementary businesses and adjacent markets; we don’t have identical businesses in common markets,” said then-CEO Craig Dahl shortly after the merger. “We have a tremendous organization coming out of this transaction.” Dahl retired in October and was replaced by Tom Shafer, whose role in the combined company is not yet clear.
Huntington has been an aggressive buyer in the past, acquiring Ohio’s First Merit in 2016 and solidifying its presence in the state.