Regulators Apparently Aren't Opposed to Bank Mergers After All

        By Maureen Farrell
        Hell hasn't frozen over. Pigs aren't flying. But some mergers between regional banks are finally getting done.
        Regulators on Tuesday said they approved CIT Group Inc.'s $3.4 billion deal to acquire IMB Holdco LLC, the parent of OneWest Bank NA. That green light from the Office of the Comptroller of the Currency and the Federal Reserve is giving investors and analysts the sense that regulators aren't as hostile to potential mergers as previously thought.
        Drexel Hamilton analyst David Hilder said that it's now clear to him that "the Fed doesn't have general objections to bank deals."
        He called it a "positive catalyst" for more acquisitions of banks with up to $25 billion in assets. The Fed could even consider bigger deals, but the CIT clearance at the very least paves the way for smaller deals, he said.
        The CIT deal comes on the heels of another regulatory approval earlier this month, when the Fed signed off on BB&T Corp.'s roughly $2.5 billion deal for Susquehanna Bancshares Inc.
        Until then, there had been a sense in some corners of Wall Street that just about any bank deal had the potential to be squashed by regulators.
        That concern had been brewing as bankers and analysts watched the trouble that M&T Bank Corp. and Hudson City Bancorp Inc. had in getting approval for their potential combination. After announcing a stock-and-cash deal valued at $3.7 billion in August 2012, the two banks have been waiting for nearly three years to get their merger cleared by regulators. The banks now say they expect to close the deal by Oct. 31, the latest of several extension they've announced.
        That deal now looks like an anomaly rather than a sign of the new era of bank regulation, Mr. Hilder said. M&T has said that the Fed concerns about its anti-money laundering protocols, which it has been working to bolster. M&T did not respond to requests for comment Wednesday.
        Both the CIT and BB&T deals were cleared within a year of announcement. Bank executives can now expect to have a deal considered and potentially approved in a reasonable time frame, Mr. Hilder said.
        It still remains unlikely that the Fed would approve a much bigger bank deal. The WSJ outlined in a front-page article Tuesday that the Fed has finalized new rules to force large banks to hold additional capital, a sign that regulators want those institutions to get smaller, not bigger.
        But these deals show that for the small- to medium-size banks, a bit bigger may be all right with the Fed.
        Meanwhile, Mr. Hilder and other analysts see CIT's stock moving higher as investors digest the implications of the deal. He called the deal a win on several fronts for CIT. Among them, since OneWest has a retail branch network, it gives CIT access to broad-based stable funding from customer deposits.
        Shares of CIT rose 2.2% Tuesday, shooting up around 3 p.m. New York time, after the OCC said it approved the deal. CIT plans to announce earnings next Tuesday before the open. They're up an additional 0.8% Wednesday, outpacing the financial stocks in the S&P 500.
        (END) Dow Jones Newswires

        July 22, 2015 12:45 ET (16:45 GMT)

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