The US regional banking crisis seems to be far from over. In the last two years, the regional banking industry in the United States has been on shaky ground. PacWest fell more than 40% in pre-market trade on news that the California-based bank has been considering strategic options, including a possible sale. Other regional banks that have suffered losses include First Horizon Corp. (40% down) Western Alliance (-15%) and Zions Bancorporation (-10%).
There are reports that a lender from Canada Toronto-Dominion Bank Group cancelled its $13.4 billion acquisition of First Horizon Corp on Thursday, sending the US bank’s shares down 44.5% in premarket trading. The two banks stated in a statement that they opted to discontinue the merger because there was no certainty about when they would receive regulatory permits.
According to the banks, as part of the termination, TD would pay First Horizon $200 million in addition to a $25 million fee reimbursement. The purchase, which would have been TD’s largest, had faced months of regulatory uncertainty and was recently under pressure from TD’s investors following the regional banking crisis in the United States.
“We are surprised that the parties could not come to an agreed-upon lower price and believe that there could be broader repercussions from walking away from the deal,” Barclays analyst John Aiken said. “This could affect the willingness of potential partners to sit across the table from TD in the future,” Aiken added.
Following the failures of Silvergate Capital Corp., SVB Financial Group’s Silicon Valley Bank, and Signature Bank in March, JPMorgan acquired First Republic Bank on Monday in a government-led deal.
The US Fed had increased rates by 25 basis point yesterday and markets ended lower. These developments came as Fed Chair Jerome Powell stated that it will take time for inflation to fall and that cutting rates would be inappropriate in such a scenario. A higher interest rate environment hurts banks.