U.S. Bank and MUFG Union Bank touted the expected benefits of their proposed merger Tuesday at a public hearing called by the Federal Reserve and Office of the Comptroller of the Currency (OCC). However, some community groups asserted they’d remain opposed to the deal until those benefits are finalized.
“We thank U.S. Bank for continuing discussions regarding a [community benefits agreement], but no such agreement is in place,” said Kevin Stein, deputy director of the California Reinvestment Coalition (CRC), according to American Banker.
The CRC and 66 of its partner organizations are seeking a detailed plan in which the Minneapolis-based lender discloses how it will boost investments on the local level and avoid branch closures in communities of color and rural areas. The group outlined its concerns in a 36-page letter to the Fed and OCC in November.
In a statement posted to U.S. Bank’s website, CEO Andy Cecere said the bank intends to invest $100 billion over five years into the communities it touches — a figure that surpasses the $88 billion agreement PNC announced when it acquired BBVA’s U.S. footprint last year.
Cecere said the bank would retain its presence in each market Union Bank serves and vowed not to desert any low- to moderate-income (LMI) areas in California — adding U.S. Bank plans to open new branches in LMI tracts.
Cecere also said U.S. Bank would be retaining all of Union Bank’s front-line branch employees and boost the minimum wage for all of its U.S. employees this year to $18 an hour, from $15.
Reba Dominski, U.S. Bank’s chief social responsibility officer, said the agreement prioritizes LMI and nonwhite-majority communities’ “access to capital, small-business growth, affordable housing, environmental impact, philanthropy and supplier diversity.”
“We are committed to advancing neighborhood revitalization and the preservation of affordable housing, including a willingness to finance more complex deals that focus on racial equity and environmental sustainability,” Dominski said, adding the plan “includes a governance and accountability model to further two-way dialogue with community organizations to develop shared solutions.”
Jesse Van Tol, CEO of the National Community Reinvestment Coalition, acknowledged the listening sessions U.S. Bank held — which, by the bank’s estimate, took in feedback from more than 200 community leaders. Van Tol characterized the talks as “productive, but they are not yet resolved.”
He urged regulators to require banks engaged in a merger to issue a “forward-looking commitment that demonstrates clearly significant public benefits” before a tie-up is approved.
Tuesday's hearing may have provided a glimpse into a new normal around bank mergers. President Joe Biden in July issued an executive order requiring the Justice Department, Fed, OCC and Federal Deposit Insurance Corp. (FDIC) to update their guidelines "to provide more robust scrutiny” in that arena.
House Financial Services Committee Chair Maxine Waters, D-CA, has backed an uptick in public hearings on large bank mergers. U.S. Bank agreed to acquire MUFG Union Bank in September in a deal worth $8 billion.
The merger’s impact on LMI areas isn’t the only concern community advocates raised at Tuesday’s hearing. Kendra Noel Lewis, executive director of the Sacramento Housing Alliance, cited the prospect of decreased competition in Union Bank markets, which she said may make housing less affordable absent a commitment from U.S. Bank.
Cecere sought to counter that point, saying U.S. Bank has roughly one-third (or less) in assets compared with California’s three largest banks.
However, size can play to the bank’s advantage, Dominski said.
“With size, comes the ability to scale,” she asserted. “In our plan, we will not simply put the two entities together, we will meaningfully increase community investments.”
Not every community advocate attending Tuesday’s hearing spoke out against the deal. Ismael Guerrero, CEO of Mercy Housing, a Denver-based affordable housing nonprofit, called U.S. Bank “highly regarded” in his organization’s space, according to American Banker.
Two MUFG Union Bank executives spoke at the hearing, too. Kevin Cronin, MUFG Union’s CEO, noted that the smaller bank will have a 2.9% ownership stake in U.S. Bank after the transaction is completed — enough to be a “substantial” shareholder.
“We believe the tenets outlined in [U.S. Bank’s community benefits plan] mirror the spirit of, and will continue to build on, the legacy of MUFG Union Bank’s community support in California,” Julius Robinson, MUFG Union’s head of corporate social responsibility in the Americas, said Tuesday, adding he expects a “continued high level of engagement with our communities” that extends the bank’s “exemplary” record with regard to the Community Reinvestment Act (CRA).