Columbus, OH-based Huntington Bancshares Inc. (HBAN - Free Report) is set to strengthen its Michigan branch network by acquiring 11 branches in Central and East Michigan from Bank of America Corp. (BAC - Free Report) . The deal is expected to close in mid-2014.
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According to the terms of the deal, Huntington will assume deposits worth $450 million, for a 3.5% deposit premium. However, the deal does not include loan balances.
Owing to the transaction, Huntington will spread its wings in several parts of Michigan including Midland, Alma, Port Huron, Gratiot and Richmond. Further, it will add offices in stores of Meijer, Inc. – a retail chain based in Michigan. Upon closure of the deal, its total number of Michigan branches will stand at 173.
Why the Deal?
The latest deal comes as part of Huntington’s strategy to boost its footprint in the Michigan market. Apart from a series of public-private alliances in Michigan, the company initiated a strategic collaboration with Meijer in 2012 in order establish in-store locations. The company is currently running 40 in-store branches and aims to set up more than 80 branches in Meijer’s Michigan stores.
For a major regional bank like Bank of America, the deal seems to be an effort to shed a number of branches to save costs. Notably in Jan 2014, the company inked a deal to vend around 23 branches located in Arizona and Nevada to Washington Federal Inc. (WAFD - Free Report) .
Banks are always striving to gain more access to customers. Strategic locations provide easy accessibility to customers and from a bank’s perspective, increased footprint automatically increases its deposit and loan portfolio, which in turn enhances revenues.
Huntington’s latest branch acquisition followed the completion of the bank’s merger with Camco Financial Corp. in Mar 2014. Given its decent fundamentals, we look forward to such acquisitions by the bank, which will enhance its long-term growth prospects.
Further, we remain optimistic following the Federal Reserve’s approval of Huntington’s 2014 capital plan. The company is now allowed to hike its dividend by 20% to 6 cents per share and repurchase common shares worth up to $250 million. This definitely enhances inventors’ confidence in the stock.
Huntington currently carries a Zacks Rank #3 (Hold). Peoples Bancorp Inc. (PEBO - Free Report) is a better-ranked Midwest bank. It currently carries a Zacks Rank #1 (Strong Buy).