More than a year after the deal was initially announced, U.S. Bancorp (NYSE:USB) has finally received regulatory approval from the U.S. Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation to acquire MUFG Union Bank’s core regional banking franchise from Japan’s Mitsubishi UFJ Financial Group (NYSE:MUFG).
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U.S. Bancorp is the parent company of the U.S. Bank National Association.
U.S. Bancorp Strengthens West Coast Presence
U.S. Bancorp recently divested three MUFG Union Bank branches in San Bernardino County, California to HomeStreet Bank. These divestitures were instructed by the Department of Justice in connection with the acquisition.
The $8 billion acquisition of MUFG Union Bank, which is now awaiting Japanese regulators’ approval, is expected to close before the end of this year. The acquisition will enhance U.S. Bancorp’s position on the West Coast by adding 1 million customers and nearly 190,000 small business clients. It will also uplift U.S. Bancorp’s position in California to 5th place from 10th in terms of deposits.
Following the acquisition, U.S. Bancorp is estimated to have assets worth $679.6 billion and capital worth $51.6 billion.
On Friday, U.S. Bancorp stock was up 3.4% after the bank posted better-than-expected third-quarter results. Revenue grew 7.4% year-over-year to $6.33 billion, topping analysts’ estimate of $6.24 billion. Meanwhile, EPS declined 10.8% to $1.16 but managed to stay ahead of the Street’s estimate of $1.15. Charges related to the MUFG Union Bank acquisition and a higher provision for credit losses dragged down the Q3 earnings.
Is USB a Good Stock to Buy?
Wall Street is cautiously optimistic about U.S. Bancorp stock, with a Moderate Buy consensus rating based on five Buys and nine Holds. The average USB stock price target of $53.86 suggests 26% upside potential from current levels. Shares have declined nearly 24% year-to-date.
