June 5, 2023

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First Horizon stock fell 50% after the collapse of the TD Bank merger

New York (CNN) He owns First Horizon and TD Bank canceled A $13 billion deal that would have made America’s sixth largest bank, adding to the turmoil gripping regional lenders in the country.

stuck in the worst banking crisis since 2008, first horizon (FHN) The share price is down about 40% over the past two months, dropping below the $25 per share TD offered when the acquisition was announced in February 2022.

The stock closed at $15.05 a share on Wednesday and fell another 36% on Thursday after banks abandoned the deal.

First Horizon is a regional lender in the southeastern United States and has been helping Canadian TD expand south of the border. But regional banks have lost investor and customer confidence since the collapse of Silicon Valley Bank and Signature Bank in March.

On Monday, a third regional bank, The First Republic, it failed And JPMorgan bought most of its assets. Fourth, PacWest Bank confirmed earlier Thursday that it is looking for a financial lifeline.

First Horizon said it remains stable, liquid and diversified.

“While today’s announcement is unfortunate and unexpected, First Horizon will continue its growth journey from a position of strength and stability,” First Horizon CEO Brian Jordan said in a statement.

TD said in a statement that the companies canceled the merger due to the unexpectedly long regulatory approval process. Without an approval timeline, companies are starting to wonder if the deal will ever have the regulator’s blessing. TD said the regulatory issue was for “reasons unrelated to First Horizon.”

In an interview with CNBC, Jordan agreed that he didn’t think the deal was canceled because TD Bank wanted to avoid buying First Horizon as regional bank stocks fell.

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“We were unable to get a timetable for approval and we reached this agreement,” Jordan said. “We never assumed that regulatory approval was given. We always knew there was a risk in this process.”

He added that he believes the banking sector remains strong, and that First Horizon has not made major shifts to tighten lending standards.

“I think things will settle down, it will take some time,” Jordan said. “At the same time, we are seeing what is around margins contraction, just because of tight financial conditions.”

Although TD did not directly cite the banking crisis or First Horizon’s declining market value as a reason for abandoning the purchase, CEO Bharat Masrani said in a statement that the decision provided “clarity” to its customers and shareholders.

TD will pay First Horizon a $200 million breakup fee plus a $25 million repayment fee.

Shares of other regional banks have plunged in recent days after the failure of the First Republic. Investors are waiting for the next shoe to drop. As early as Thursday, based in California PacWest Bank said it is exploring “all strategic options” After its share price was halved in after-hours trading after a bloomberg Report that he was considering selling.

backquest (PACW) Stocks were nearly cut in half on Thursday, while Western Alliance Bank (WAL)another regional competitor, increased by more than 20%.

As the Federal Reserve raised interest rates to fight inflation, the value of regional lenders’ loans and bond holdings collapsed. Customers have been moving their money to larger banks, leaving some regional banks without the liquidity they need to pay for withdrawals.

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