Shares of regional banks, including PacWest, Western Alliance, and First Horizon, rebounded in premarket trading after a week of steep drops. The collapse of First Republic earlier in the week had raised concerns about deposit outflows, but PacWest stated it had not seen any unusual outflows. The rapid drops in stocks have led some to suspect foul play by traders, and the American Bankers Association has asked regulators to take action against market manipulation and abusive short-selling practices.
TD Bank and First Horizon have terminated their merger agreement due to a lack of clarity on regulatory approvals. TD will pay First Horizon $200 million on top of a $25 million reimbursement fee. The merger would have made TD the sixth-largest bank in the US by assets. The termination could have broader repercussions for TD's future partnerships and deployment of excess capital.
The stock market opened lower as aftershocks from March's banking turmoil continued. PacWest's shares fell by 45% and other regional lenders also fell after the opening bell. Oil stabilized after a mini-flash crash and gold prices briefly surpassed their record closing high. Stock indexes fell ahead of a big earnings day, with Apple and other big companies on tap. Treasury yields held steady.
TD Bank has called off its $13.4 billion acquisition of First Horizon Corp due to regulatory uncertainty. TD will pay $200 million to First Horizon, in addition to a $25 million fee reimbursement. The collapse of the deal further spooked already shaky sentiment towards U.S. regional banks. TD agreed to buy First Horizon in February last year to expand its presence in the United States.
Regional bank stocks continue to slide, with PacWest leading the way down 40% in premarket trading after announcing a strategic review that could include a potential sale. First Horizon also fell 40% after the regional lender and TD Bank terminated their merger agreement due to uncertainty around regulatory approval. Other notable declines included Western Alliance and Zions Bancorp. The SPDR S&P Regional Banking ETF (KRE) was down 3.7%. These drops show that investors still lack confidence in the stability and long-term profit outlook of regional banks.
Shares of regional bank First Horizon plummeted by 50% after its planned merger with TD Bank collapsed. The stock market reacted negatively to the news, with other regional bank shares also experiencing a drop. The collapse of the merger came just a day after JPMorgan announced its acquisition of First Republic.
Toronto-Dominion Bank and First Horizon have called off their merger agreement due to the economic uncertainty caused by the pandemic. The two banks had announced the merger in November 2019, but have now mutually agreed to terminate the deal.
