Blumenthal and Tong differ in views on bank acquisition
U.S. regulators reviewing plan for People’s United
Two of Connecticut’s leading elected officials have differing views on the People’s United acquisition by M&T Bank as the regulatory review of the deal moves toward its completion.
U.S. Sen. Richard Blumenthal, D-Conn., said he remains “deeply skeptical” that the People’s United deal won’t disrupt the local economy in Bridgeport and elsewhere in Connecticut. The deal is being reviewed by banking and antitrust regulators at the federal level.
One of Blumenthal’s biggest concerns is how many Connecticut residents will lose their jobs as part of the deal: M&T notified the Connecticut Labor Department in July that 747 People’s United workers would lose their jobs as a result of the deal, which is expected to close by the end of the year.
M&T officials have spent most of the time since then meeting with state and Bridgeport officials, trying to reassure them that fewer jobs will be lost than originally projected and committing to substantial community reinvestment. But Blumenthal still isn’t convinced the deal should be approved and said he is considering submitting comments to federal regulators opposing the deal.
“I rarely have seen mergers that serve the best interests of consumers, whether its depositors or borrowers,” he said. “They simply increase the power of the acquiring bank. Consumers often see none of the benefits.”
Connecticut Attorney General William Tong said his focus is on protecting jobs from being lost.
“At this point, my focus is not on whether this merger will proceed ... but how we can work with M&T to ensure that local jobs are protected, and that our communities remain a core priority,” Tong said in a statement to Hearst Connecticut Media. “M&T has made significant public commitments to its employees and to Connecticut workers, as well as to the City of Bridgeport.”
Tale of two mergers
The People’s United-M&T deal, is one of two mergers that will reshape the face of Connecticut banking. That will move the headquarters of the bank from Bridgeport to Buffalo, where M&T is headquartered.
The other deal involves Waterbury-based Webster Bank relocating its headquarters to Stamford as part of its merger with Sterling National Bank, which is based in Rockland County in New York. That deal is also scheduled to close by the end of the year.
The combined M&T and People’s United deal will result in an
institution of roughly $170 billion in assets.
“The Connecticut banking landscape has seen dramatic changes, beginning in 1985 with the first truly interstate banking merger between CBT and the Bank of New England, which was approved by the Supreme Court,” said John Carusone, president of the Bank Analysis Center, a Hartford-based industry consulting firm. “Thirty six years later, the WebsterSterling and Peoples United-M&T deals will rearrange the industry one more time.”
Carusone said the Webster-Sterling deal “is a merger of equals.”
“In this case two institutions of roughly equivalent size come together seeking to make financial alchemy,” he said. “Mergers and acquisitions between banks usually leave a trail of winners and losers from the transaction. A merger of equals is a different type of transaction.”
The Webster-Sterling merger has attracted less attention largely because there has been no indication layoffs will occur as a result. Carusone said it’s unlikely the deal won’t result in some layoffs after it gets the necessary approvals.
Even in a merger of equals, Carusone said one institution always dominates based on its proportionate share of capital or quality of franchise or other factors.”
“In this case, Webster will be the nominal dominant bank with its shareholders owning about 50.4 percent of the combined bank,” he said. “Importantly, the CEO and ultimate chairman will be from Webster. Regrettably, Waterbury will lose a prestigious corporate headquarters with all that that implies, but aside from some top management staff, rank and file employees and customers should feel few negatives.”
By merging two banks of the same size, Carusone said officials at Webster and Sterling are “betting on the future and enlarging market share without disturbing the existing balance of contentedness between employees and customers.”
“That is how management will try to propel the stock price of the combined institution to greater value,” he said. The deal will create the 50th largest bank in the country in terms of total assets, according to Carusone.
From his perspective as an elected official, Blumenthal said the Webster deal is different because “Stamford is accessible from Waterbury for employees.”
“But as is the case in any merger, the key is control, who calls the shots, who is in charge of the decision making,” he said.
People’s layoffs
Economist Donald Klepper-Smith said both deals have significant economic consequences for Bridgeport, Waterbury and all of Connecticut. Klepper-Smith is chief economist and director of research for DataCore Partners and served as chairman of the governor’s Economic Advisory Council under Gov. M. Jodi Rell.
“We have seen a hollowing out of corporate Connecticut, particularly in the finance sector,” Klepper-Smith said. “This deal has ramifications for residents, for taxpayers, for businesses. It is further evidence of a steady erosion of economic health and a step down in confidence.”
As an example, loans and investments that might have been made when a bank had headquarters in Connecticut are less likely to be made when a local financial institution is acquired by an out-of-state bank, according to Klepper-Smith.
“There is less institution knowledge about what is important to the local market when the decision making process is not here in Connecticut,” he said.
Klepper-Smith estimated that if the number of layoffs at People’s United remains at 747 jobs, the economic impact to Connecticut would be another 1,100 jobs lost indirectly because a reduction in spending by those who are laid off.
“For every dollar not spent, there's another $1.18 that is lost,” he said. “And you couldn’t pick two more vulnerable cities to lose corporate headquarters from.”
Bridgeport Mayor Joseph Ganim and Neil O’Leary, his counterpart in Waterbury, could not be reached comment about the impact of losing the two headquarters.
Webster officials said that although the combined company will be headquartered in Stamford, the bank’s headquarters at 145 Bank St. in Waterbury will be used for unspecified corporate functions. Bank officials did not respond to questions from Hearst Connecticut Media if the merger would result in any layoffs.
M&T Mending Fences with Connecticut officials
M&T announced on Oct. 25 a plan to provide $43 billion in loans, investments, and other financial support. The money will be spread out over communities served by People’s United as well as those already served by M&T, according to bank officials.
“At its core, M&T is a bank with a deep commitment to serve our communities and make a difference in people's lives,” Rene Jones, M&T’s chairman and chief executive officer, said in a written statement. “We are also committed to taking action to help address inequities that have existed for years. This plan is another step in our journey to orient ourselves around what our communities need most.”
Bank officials said the five-year plan of financial support, which will be rolled out shortly after the deal is closed will be done to create greater economic opportunity for low-to-moderate income families and neighborhoods, as well as people and communities of color. Among the highlights of the plan are:
1 $23 billion in loans for home purchases, home equity and small businesses.
1 $20 billion for community development initiatives and affordable housing.
1 A $7 billion investment in the development of multi-family, affordable and workforce housing across the bank’s expanded footprint.
1 Designating as many as 115 branches throughout its expanded footprint as multicultural banking centers, in which bilingual branch staff can support the banking needs of the bank's non-English-speaking customers and offer guidance in their preferred language.
Tong said he will be “watching closely to ensure M&T honors its promises regarding local branch services in historically underserved communities in Bridgeport, East Hartford, and other communities.”
“After early mixed messages and confusion, I appreciate the willingness of M&T to meet with me and other officials to discuss and affirm their commitments to Connecticut,” he said. “Should they waver on any of those commitments, they know to expect a call from me.”
But Blumenthal said if M&T officials have reduced the number of employees they plan to lay off if the deal with People’s United is approved, he is hard pressed to know how many jobs will be lost.
“They have released information in dribs and drabs,” he said. “Whatever the number is, there are still to many layoffs in Connecticut.”
Jones told Tong in an Aug/ 5 letter that M&T had originally identified 691 workers would be based in Bridgeport post-merger.
“M&T’s commitment (is) to having at least 1,000 employees in our regional headquarters in Bridgeport with in the first 12 months following conversion, which we anticipate will take place in February 2022,” Jones wrote in part. His reference to “conversion” refers to when banks that have been acquired switch their computer systems and change other elements.
But M&T officials declined to reveal to Hearst Connecticut Media whether the number of layoffs had changed.
A company spokesperson said whatever layoffs occur won’t take place until some point after the deal has closed. M&T’s notification to the Connecticut Labor Department has said the layoffs were supposed to have started Oct. 1.
In an acquisition like People’s United, Carusone said being the controlling bank means M&T calls the shots, which has important implications, particularly in terms of the amount of layoffs. He said it is unlikely that, despite assurances to the contrary by M&T, that completing the deal won’t result in hundreds of layoffs.
“The buyer bank looks to earn back its premium it paid for the target bank by cutting redundant expenses,” Carusone said. For example, he said, M&T doesn’t need a human resources department here in Connecticut and one in Buffalo.”
Another impact that is felt when banks merge is that “some of the financial philanthropic largesse with losing a large bank headquarters,” Carusone said. “And customers may come to feel they don’t have the same access to key decision-makers in the bank since those are in another state, hundreds of miles away.”