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Huntington (HBAN) & TCF Financial to Merge With $168B in Assets

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Huntington Bancshares Incorporated (HBAN - Free Report) recently entered into an all-stock acquisition deal with Detroit-based TCF Financial Corporation , per which the former will merge with the latter with a total market value of about $22 billion. The combined entity will operate under the name and brand of Huntington with two headquarters in Detroit, MI and Columbus, OH, and maintain its operating presence in all the existing markets.

The deal, approved by the boards of both banks, on completion will be listed as one of the top 10 U.S. regional banks, along with having a rank 5 in approximately 70% of deposit markets. Also, the combined entity with the largest branch share will be positioned at the second in Consumer Deposits in the footprint. Huntington will expand in Minnesota, Colorado, Wisconsin, and South Dakota, along with strengthening its presence in Chicago.

The combined entity is aimed at capturing market opportunities and boosting the client base through a distinctive, "People-First, Digitally-Powered" customer experience. Moreover, the companies’ expanded scale, technological advancement and increased product offerings will help capitalize its market share.

However, the deal awaits certain customary approvals by shareholders of both companies and certain customary regulatory approvals. The transaction is anticipated to close in second-quarter 2021.

"This merger combines the best of both companies and provides the scale and resources to drive increased long-term shareholder value. Huntington is focused on accelerating digital investments to further enhance our award-winning people-first, digitally powered customer experience," chief executive officer Stephen D. Steinour of Huntington said. "We look forward to welcoming the TCF Team Members. Together we will have a stronger company better able to support our customers and drive economic growth in the communities we serve," Steinour further added.

Terms of the Deal

Columbus-based Huntington, with around $120 billion in assets, and TCF Financial, with $48 billion in assets, will create the combined entity with $168 billion in assets, $134 billion in deposits and $117 billion in loans. Strategically, the combined entity will enhance through advanced technologies, expanded distribution and product offerings, along with providing stellar revenue growth opportunities.

Also, the alliance will strengthen commercial, consumer, wealth and business banking businesses with diversified products. On completion, Huntington, maintaining a strong working culture, aims to offer superior client services. Additionally, TCF Financial’s national inventory and equipment finance businesses will enhance Huntington's current commercial exposure.

Per the deal, the Commercial Bank division will be headquartered in Detroit, with 800 employees of the combined company. Further, the holding company and the Consumer Bank will have headquarters in Columbus.

Members from both Huntington and TCF Financial will lead the combined entity. The organization’s boards will include five directors from TCF Financial. Post-closure, Stephen D. Steinour will head as the chairman, president, and CEO of the holding company as well as CEO and president of the bank. Additionally, Gary Torgow will operate as chairman of the bank's board of directors.

Financial Benefits

Cost synergies are anticipated to approximate around $490 million, or 37% of TCF Financial's non-interest expense.

Per Huntington’s expectations, the deal is likely to be 18% accretive to earnings by year-end 2022, including the fully phased-in transaction cost synergies.

Goldman Sachs & Co. LLC, a unit of Goldman Sachs (GS - Free Report) , acted as financial advisor for Huntington, while Keefe, Bruyette & Woods acted as financial advisor for TCF Financial.

Bottom Line

Huntington’s acquisition of TCF Financial is in sync with the aim for increasing long-term shareholder value in the current era of digitization. The deal is capable to withstand the uncertainty surrounding the economy due to the coronavirus pandemic.

In the current scenario, banks are moving toward consolidation to dodge the heightened costs of regulatory compliance and increased investments in technology, in a bid to be competitive. Furthermore, the current interest-rate scenario has taken a toll on banks’ net interest margins, thereby eroding overall profitability.

Therefore, such moves have caused investors to become optimistic about banks’ growth prospects. Notably, shares of Huntington and TCF Financial have rallied 27.7% and 11.4%, respectively, over the last six months.



Currently, both Huntington and TCF Financial carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Similar Moves

Recently, Morgan Stanley (MS - Free Report) concluded the acquisition of E*TRADE Financial in an all-stock deal worth $13 billion and now holds $3.3 trillion in assets. The move follows the bank’s efforts to record revenues from balance-sheet light and more lasting sources of revenues.

This October, Charles Schwab (SCHW) concluded the acquisition of TD Ameritrade Holding for roughly $22 billion. This has created a behemoth in the online brokerage space, with combined client assets of more than $6 trillion and serving nearly 28 million brokerage accounts.

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