Canada’s TD Bank has pulled its planned purchase of US bank First Horizon, stating that questions around approval of the £13.4 billion deal from regulators was to blame.
Following news of the collapsed deal on Thursday, shares in First Horizon fell by 33.2%, pushing its shares down 58.9% this year. The deal was first announced in February 2022, but had been stalled by US regulators multiple times over fears that TD could become too influential in the US market. The acquisition would have made TD the sixth largest US lender.
The news comes amid a tumultuous week for US regional banks, several of which are facing significant declines in stock value as a result of the wider fallout of the Silicon Valley Bank (SVB) collapse. Signature Bank, First Republic, and Silvergate have all shutdown since SVB’s failure in March.
PacWest and Western Alliance shares plummeted on Thursday, and the KBW Regional Banking Index (an index which tracks US regional bank stocks) has fallen 35% over the past three months.
Since TD pulled its offer, renowned activist investor and co-founder of Trian Fund Management, Nelson Peltz, told the FT that the US deposit insurance scheme limit should be increased, with account holders paying insurance to protect balances over $250,000 (the current amount insured by the FDIC).
Peltz stated: “It should stop the deposit outflow from the small regional and community banks,” Peltz said. “I don’t think we want all of the funds just going to major banks.”
“If this stops with First Republic being acquired by JPMorgan, I would be happy, but it may not,” Peltz continued.
The FDIC this week published a report into potential reforms of the US deposit insurance scheme, and while the report did not recommend a new cap, it does read that raising the insurance cap to $2.5 million from $250,000 would be likely to cover the funds needed by most SMEs to cover payroll costs.