First Horizon can't see the finish line for sale to TD

First Horizon had hoped that its first-quarter earnings report would be its last. On Tuesday, however, the company confirmed that appears increasingly unlikely.

The Memphis, Tennessee-based bank indicated in its first-quarter earnings presentation that its planned sale to TD Bank Group, valued at $13.4 billion when announced in February 2022, would most likely not win regulatory approvals in time to close by a May 27 target date.

The $81 billion-asset First Horizon also said TD "cannot provide a new projected closing date." It added: "No further updates at this time." A TD spokesperson did not immediately respond to a request for comment.

The deal, originally slated to close in the fall of 2022, has been delayed multiple times as the banks try to clear an increased number of regulatory hurdles amid added scrutiny of acquisitions imposed by the Biden administration. 

After delaying the deal from late last year to early 2023, the companies missed a Feb. 27 target date and pushed it out three months to the late May deadline. 

Then in early March, TD cautioned that it was dubious about the May 27 deadline. TD CEO Bharat Masrani told analysts at the time that he couldn't speculate on the potential timing of an extended closing date or whether another delay would either derail the transaction or affect its purchase price.

First Horizon has also said that TD initiated discussions about further extending the target date.

After the stock prices of both banks fell earlier this year, some TD shareholders urged the Canadian bank to abandon the deal or renegotiate it.

Several large bank deals have faced prolonged review processes over the past two years and, by extension, overall deal activity has slowed.  

New York Community Bancorp and Flagstar Bancorp, for example, needed more than 19 months to close a deal that was announced in April 2021. Columbia Banking System waited about 15 months before it earned the approvals needed to close its merger with Umpqua Holdings early in 2023.

M&A outlook gets bleaker in wake of bank failures

There were just 168 U.S. bank M&A deals announced last year, down from 204 in 2021, according to S&P Global Market Intelligence. Only six deals were announced in January, the lowest deal tally for the first month of the year since 2009. Eight deals were announced in February, according to S&P's latest data.  

"It's not the only factor — you have recession concerns, weaker bank stocks — but no question there are added layers of scrutiny that have created lengthy delays and caused a lot of nervousness around M&A," Jacob Thompson, managing director of investment banking at Samco Capital Markets, said in a recent interview.  

First Horizon reported first-quarter net income of $256 million, or 43 cents per share, up from $198 million, or 34 cents per share, a year earlier.