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TD’s Acquisition of First Horizon Called Off Raising Questions and Likely Adding to U.S. Regional Banking Pressures

This commentary reviews the potential implications from the mutually terminated acquisition of First Horizon Corp. by The Toronto-Dominion Bank.

Key highlights include:

•The terminated deal comes at an inopportune time for the U.S. banking sector, as some regional bank stocks remain under severe pressure despite most having reported solid credit fundamentals in 1Q23.

•Although we view TD’s risk and operational management as strong, the closing delay, especially considering that other large deals were approved in this timeframe, raises questions of a potential U.S. regulatory issue at TD. At the same time, it also raises questions regarding the coordination and preparedness of the regulators themselves.

•While the press release clearly cited that the deal falling through had nothing to do with First Horizon, a falling stock price attracts unwanted attention.

“The overall impact on the U.S. banking sector continues to play out, but we view this event as further increasing investor and customer anxiety in an already volatile environment,” said Michael Driscoll, Managing Director - Head of NA FIG.