U.S. Bancorp executives now expect the acquisition of MUFG Union Bank to close later in the second half of this year, another revision to the timeline for completing a deal announced in September 2021.
The new timetable will result in several months of delay for a planned conversion, and will cause the bulk of the cost savings to be realized after 2023, company executives said Monday.
However, "from a timing standpoint, that will shift a little bit," Dolan said in remarks at an investor conference hosted by Barclays. "We had expected that we probably would have achieved in 2023 about 75% of that. Right now, because of the timing, it's probably 40% to 50% of the cost saves will happen in 2023, and the rest of it in 2024."
CEO Andrew Cecere, speaking at the same conference, said U.S. Bancorp needs a three-day holiday weekend to convert MUFG Union Bank's accounts and system to U.S. Bancorp's platform. The Minneapolis company had planned to do the conversion over Presidents Day weekend in February 2023, but it has pushed the move back to Memorial Day weekend in May. Cost savings will be delayed as a result.
Cecere said he had hoped to win the Federal Reserve's thumbs-up on the deal early in the second half of this year. But the $558 billion-asset bank's current expectation about regulatory approval "is a little later in the second half as opposed to a little earlier," he said. "And we just need a time frame for the data conversion to ensure a successful conversion. And to be prudent about the timing, we moved it to Memorial Day."
When the $8 billion cash-and-stock deal was announced a year ago, the companies had expected to finalize it by the end of June 2022. Then in May, Tokyo-based Mitsubishi UFJ Financial Group, the parent company of MUFG Union Bank in San Francisco, said the sale of its U.S. bank would
Despite the delays, U.S. Bancorp expressed confidence that the deal will get across the finish line this year, creating a $690 billion-asset company and giving U.S. Bank's parent company greater market share in California.
And even though a chunk of expense savings will get pushed back to 2024, U.S. Bancorp still expects the deal to prove 6% accretive to its 2023 earnings per share. The deal's economics are benefiting from rising interest rates and the increased lending profitability that both banks are enjoying as a result, according to Dolan.
"From a financial standpoint, it's a really good transaction," he said.