If we were to humanize TD and First Horizon for a second, they might be at the post-relationship stage where each is clandestinely checking the other’s social media feed. TD might be growing a beard and re-committing to a workout regimen. First Horizon might be throwing its best swimwear in a suitcase and heading to Miami or Vegas with its single friends for some beachside (or poolside) relationship detox.
Each held annual investor conferences this week and, from the messaging, it appears First Horizon is ready for its hot bank summer.
"Our people are energized," Anthony Restel, the Memphis, Tennessee-based bank’s president of regional banking, said Tuesday, according to American Banker. "We've got a tremendous amount of new account originations. … Our people are super pumped to be out and deliver for their clients and be active, playing offense again when we haven't been doing that for the last couple of years.”
TD, in February 2022, sought to acquire First Horizon for $13.4 billion in a deal that would both expand the Canadian lender’s Southeast U.S. footprint and value First Horizon’s stock at $25 per share.
Regulators were less enthused. TD attempted to grease the wheels with a five-year, $50 billion promise to boost residential lending in low- to moderate-income areas. But questions about the bank’s anti-money laundering practices reportedly won out. TD and First Horizon mutually terminated the merger in May over “uncertainty” as to when the deal would gain the sign-off it thus far had lacked.
Since then, a First Horizon shareholder sued TD, alleging the bank made a series of misleading statements regarding its AML functions and regulator resistance to the deal.
At its own annual investor event Thursday, TD CEO Bharat Masrani said the bank is "working with [its] regulators to put this matter behind us. And I'm confident that in time we will.”
Masrani did not specify the issues being discussed but said, according to Reuters, they had "nothing to do with our good-faith dealings with customers.”
TD executives last month outlined a plan to grow organically throughout the Southeast — targeting markets such as South Florida, Atlanta and North Carolina; doubling its hiring of wealth advisers; and opening 150 new U.S. branches by 2027.
First Horizon this week, too, set its aim to "build a banking franchise in the South that is going to be unparalleled,” CEO Bryan Jordan said, according to American Banker. To that end, the bank has “hit the ground running,” he said.
The bank’s new “hurry-up” mode may balance out some of the waiting it’s done in recent years — integrating with IberiaBank after a 2019 merger, weathering the COVID-19 pandemic (though First Horizon added to its footprint through a deal with Truist).
First Horizon hit a speed bump in March, when the collapse of Signature and Silicon Valley Bank spurred a crisis of confidence among investors in regional banks. First Horizon’s stock price cratered by as much as 33% the day after Signature failed. Trading was halted, and shares closed 20% down after it resumed.
The bank’s share price would continue to drop — to $15.05 by May 3, and then another 33%, to $10.06 on May 4, when the TD deal was terminated. It has rebounded to $11.63 as of Friday — still far below the $25-per-share windfall the TD transaction would have fetched.
But deposits jumped by about $1.5 billion in May to $61.8 billion, giving First Horizon its best month ever, CFO Hope Dmuchowski said, adding that her inbox has been "flooded with emails" from clients since the TD deal fell through, according to American Banker.
The $80.7 billion-asset bank is wary of growing too quickly, though. Jordan noted that the compliance cost becomes "extraordinarily expensive" once an institution surpasses the $100 billion threshold.
"We're not afraid to grow through M&A, and if the right opportunities present themselves, we'll figure it out at the time," Jordan said, according to American Banker. "But our focus right now is operating our business and making the investments."
The $100 billion figure may be crucial as regulators are promising stricter rules — possibly including a 20% increase in capital requirements — for banks that size.
TD, for its part, has a buffer to spare. The Canadian bank last month disclosed it had roughly $18 billion in excess capital, though it is planning to buy back 30 million shares.
“We are very well-capitalized with strong liquidity — critically important in this period of economic uncertainty and volatility in the banking sector,” Masrani reiterated Thursday.
Considering each bank is running hard to strengthen its Southeast foothold, there is an outside chance they bump into each other in Miami. Or maybe they’ll just keep an eye on the Insta and Twitter feeds, and stagger their appearances to avoid any awkwardness.
