The Middletown Press (Middletown, CT)
M&T Bank raises profile
Adds CT-based People’s United
The parent company of Bridgeport-based People’s United Bank is taking a $7.6 billion buyout from regional rival M&T Bank, as its prospective owner aims for cost savings and synergies adding up to $330 million with an undisclosed impact on jobs.
If completed under People’s United CEO Jack Barnes, who chairs the company’s board, the deal would end People’s run dating back to 1842 as an independent Connecticut-based bank. The company’s headquarters tower dominates the downtown Bridgeport skyline.
M&T pledged to maintain the Bridgeport office as its New England regional headquarters, without any immediate indication of overlapping jobs that could be in jeopardy. People’s United had selectively cut some duplicate branches and corporate staff on the heels of its 2019 acquisition of the Hartford-based parent of United Bank and Farmington Bank’s parent the year before.
In People’s United, M&T adds a bank with a similar profile, as both have their headquarters in cities that have struggled economically in the past half century — M&T’s roots are in Buffalo — and have nevertheless gone toe-to-toe with Bank of America, Citi, JPMorgan Chase and other behemoths to emerge from the money centers of Manhattan and Boston.
Today, People’s United trails only Bank of America in its home state for deposits with $27.5 billion as of June 2020. Another $22.7 billion was deposited in branches across other New England states and New York as of that date, putting the company over the top of the “Be $50 Billion” target Barnes initiated in 2015.
“We have this long history of being focused on small towns [and] mid-tier cities across our footprint — and I think what tends to get missed is that by having dominant local [market] share, it produces out-sized ability to be close to your customer,” said M&T CEO Rene Jones, speaking Monday morning on a conference call. “No matter where we are [and] regardless of whether the population is growing, those are the communities that actually need financing and a bank the most.”
M&T is targeting $330 million in synergies with the People’s United deal, a 27 percent reduction from People’s United’s expense base not including its plan announced last month to close branches in Stop & Shop supermarkets.
“The way to think about it is if there were more ways to become efficient ... that would probably be offset by the growth opportunities that we have,” Jones said. “Either way you look at it, the question is how do you capture the value? We think this is more of a growth story than it is an expense savings.”
People’s United entered this year with about 6,500 employees, Barnes said in a Monday interview, with about 1,400 people assigned to its Bridgeport headquarters and the large majority of that group continuing to work remotely during the COVID-19 pandemic. Barnes echoed Jones’ comments in saying the companies have yet to work through the intricacies of overlapping job roles in Bridgeport, Buffalo, New York City and other corporate offices.
“Our 700,000 consumers, they have to service them — they can’t just flip the switch,” Barnes said. “The planning and the integration about how to do it and where the jobs end up is a difficult thing. It will take months and months.”
In a statement forwarded by a spokesperson, Connecticut Attorney General William Tong indicated his office has been in contact
with the Connecticut Department of Banking on the merger.
“What will this mean for Connecticut jobs, and lending to Connecticut’s minority-owned businesses and lower-income families in particular?” Tong stated. “What will this mean for Connecticut families seeking a mortgage for their first home purchase or local entrepreneurs seeking to expand their businesses?”
M&T’s chief financial officer voiced a similar stance to that of Barnes on the complexities of parsing through bank duties postmerger.
“Obviously we spent a bunch of time going through and looking at the operations and how we’ll combine them,” M&T CFO Darren King said Monday. “When you look at the degree of geographic overlap, it’s actually not quite as much as you might think from a branch perspective, and also when you take into account the fact that the People’s team had
already made the decision to change their posture with the Stop & Shop relationship.”
According to a sector study last year by PwC, many banks put mergers on ice in the early days of the COVID-19 pandemic before pushing them over the finish line in the back half of 2020, but with overall deal volume down. With government relief funds like the Payroll Protection Program helping prop up employers during the pandemic, banks face an uncertain outlook with interest rates near historic lows that could bolster loan demand but also limit their own income via interestbased fees.
Combined, M&T and People’s United would vault to become the 11th largest bank in the United States.
In a note to investment clients, CFRA Research analyst Pauline Bell described the combined bank as “large enough to compete head-to-head against the larger regionals and nimble
enough to simultaneously provide better service and support to local communities.”
While M&T is a small player in Connecticut with $300 million according to the Federal Deposit Insurance Corp., it is more than twice the size of People’s United for total deposits. With 1,135 branches, the combined bank will be the second largest in the Northeast after Bank of America (1,240).
In addition to its support of economic activity through lending, People’s United is also a significant community benefactor through its namesake foundation, which had assets of $57 million in 2018, distributing nearly $3 million that year to nonprofits throughout the region. Barnes said he expects M&T to maintain the foundation’s commitments going forward.
Barnes has led People’s United since July 2010, stepping in after the company’s former head of finance Phil Sherringham proposed a deal to add a network of branches in California, having ascended to the top job in 2008 after former CEO John Klein stepped down before dying of cancer. Barnes had joined People’s United as part of the company’s 2008 acquisition of Vermontbased Chittenden Bank.
People’s United estimated Barnes’ compensation at $5.8 million in 2019, up $100,000 from the year before. Under CEO pay ratio disclosure mandates by the Securities & Exchange Commission, People’s United listed the median employee’s compensation in 2019 at $68,200.
As of last March, Barnes held more than three million shares of People’s United stock, an amount that would be worth nearly $6 million more Monday morning as People’s United shares gained 12 percent to trade above $17.50 after the Nasdaq opening.