TD Bank and First Horizon Scrap $13.4 Billion Merger

TD Bank

TD Bank and First Horizon Bank have called off their $13.4 billion merger.

The financial institutions announced the end to their agreement in a joint statement Thursday morning (May 4), saying the decision came after TD told First Horizon that TD didn’t have a timetable for regulatory approvals.

“Because there is uncertainty as to when and if these regulatory approvals can be obtained, the parties mutually agreed to terminate the merger agreement,” the banks said in the statement.

The termination agreement requires TD to make a $200 million cash payment to First Horizon, a Tennessee-based regional lender, per the statement. That’s in addition to a $25 million fee reimbursement due to First Horizon under the merger agreement.

“While today’s announcement is unfortunate and unexpected, First Horizon will continue on its growth path operating from a position of strength and stability,” said First Horizon Chairman, President and CEO Bryan Jordan in the statement.

The merger had come under fire last year from lawmakers, who asked the Office of the Comptroller of the Currency to halt the deal following a report by investigative news service Capitol Forum that claimed TD engaged in practices similar to what Wells Fargo was accused of in its “fake account” scandal.

The demise of the deal — which would have created America’s sixth-largest bank — comes amid a period of turmoil in the banking sector, particularly for regional banks like First Horizon.

For example, California’s PacWest Bancorp has been considering a sale, a breakup or a capital raise as its stock price drops.

PacWest hasn’t attracted many potential buyers for its entire operation, and a buyer might have to take a loss marking down some of its loans, thus complicating the chances for an outright sale.

The bank has shed about 85% of its value since early March as investors shift their focus from regional bank stocks following the chaos in that segment, most recently with the Monday (May 1) sale of the failed First Republic Bank to J.P. Morgan Chase.

The measures taken by regulators over the past several weeks may have done little to stave off the flow of deposits from regional banks to the country’s largest lenders, especially from business banking accounts and wealthier households.