HoldCo Asset Management will stand down from its threats to pursue proxy action against KeyBank and Eastern Bank, the activist investor said in a presentation Monday.

The announcement comes after each bank, within the past two months, committed to strategies that do not include mergers and acquisitions.

“We are not focused on M&A,” Denis Sheahan, CEO of Boston-based Eastern said in January during the bank’s fourth-quarter earnings call.

At the same time, Eastern this month is expected to complete systems conversion of its most recent acquisition, HarborOne. Eastern announced that deal last April – before HoldCo invested in the bank.

However, in an October presentation, HoldCo asserted that Eastern’s executive chair, Bob Rivers, has nearly tripled the bank’s assets over the past five years “through an empire-building strategy that squandered substantial excess capital that could have been returned to shareholders.”

Last month, Sheahan said the bank has “plenty of opportunities to organically grow the company’s earnings and enhance profitability.”

“We will allocate capital towards organic growth efforts and returning excess capital to shareholders, while still maintaining appropriate capital levels,” he said during the bank’s latest quarterly earnings call.

HoldCo on Monday noted that it wished Eastern’s common equity tier 1 ratio were 11% rather than 12% but that “in light” of the bank’s clearly stated stance on M&A, Rivers and Sheahan “deserve real respect.”

“Based on what they’ve said, they have fully reversed course on an acquisition strategy that went wrong, and that takes real courage,” HoldCo said, adding that it expects  “the most likely end-game” for Eastern is an eventual sale to regional powerhouse M&T.

An M&T spokesperson told American Banker recently that the bank has a policy to not comment on market rumors or speculation.

In November comments. M&T CEO René Jones said the bank would not pursue national scale but rather would focus on being a dominant player within its current markets. 

“As you get further and further away from home and [add] more geographies, I think the management challenge goes up,” Jones said at the BancAnalysts Association of Boston conference.

“If we had the right transaction to do, we would do it,” he said of an acquisition. “There could be something out there that really is maybe not that meaningful to the bank, but really meaningful to the region.”

In its presentation Monday, HoldCo said – of both Eastern Bank and KeyBank – that it “expect[s] to be long term shareholders for the next several years, and will be actively monitoring the Company’s actions and capital allocation decisions.”

“If the Board pursues actions inconsistent with our expectations and/or to the detriment of shareholders, we will not hesitate to take any action that we deem necessary to protect the rights of shareholders and drive value, including the potential pursuit of a proxy contest and/or advocating for a sale of the Company,” HoldCo wrote.

KeyBank

As for Key, HoldCo urged the Cleveland-based bank in December to fire CEO Chris Gorman, adopt a “no acquisitions” policy and replace any board members that voted in favor of the lender’s $4.1 billion purchase of First Niagara. HoldCo on Monday asserted that the deal took 10 years to achieve earn-back of tangible book value per share.

KeyCorp last month appointed Dollar General CEO Todd Vasos as its new lead independent director and said two other board members will retire in May.

HoldCo’s request for a no-acquisitions stance comes after what it saw as confusion stemming from how Bloomberg in November interpreted Gorman’s comment that “markets in the Pacific Northwest are very rational.”

The wire service’s headline characterized Key as turning its attention toward the Northwest.

Referencing HoldCo at a conference appearance in December, Gorman said he thought KeyBank “and that particular investor are pretty closely aligned on the most important themes.” 

“Let me start by being very specific: We are not interested in any depositories. We are looking at zero depositories,” Gorman added. “So I will repeat that: We have no interest in purchasing a depository.”

HoldCo on Monday credited Gorman and Key’s leadership team “for being clear and unequivocal about breaking with the past and adopting an anti-dilution, shareholder-first mindset.”

The investor also indicated it would back off the push to oust Gorman.

“The future matters more than the past, and we now believe Mr. Gorman’s willingness to change – something that’s not common in this industry – makes him the right leader for the institution going forward,” HoldCo said.

Comerica

In its presentation, HoldCo also updated readers on its proxy concerns regarding Columbia Banking System, First Interstate Bank and Comerica.

HoldCo sought to block Comerica’s acquisition by Fifth Third, taking the matter to court. The investor sued both banks, claiming Comerica could have received a better deal and ignored another suitor, reported to be Regions.

But HoldCo arguably acted as a catalyst for Comerica’s sale, pressuring the bank to do so as early as last July.

In Monday’s presentation, HoldCo did not shy away from its role in the deal.

“The dissident deserves credit for its campaign,” reads a clipping in the deck, attributed to a unit of proxy adviser Institutional Shareholder Services.

“A review of the timeline suggests that [HoldCo’s] call for [Comerica] to consider a sale and its intention to run a proxy fight may have been catalysts that prompted the board to evaluate a transaction,” ISS wrote. “It appears the dissident's campaign pushed an underperforming bank to explore a sale, which ultimately resulted in a transaction that benefits shareholders.”