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Tdbank and see finance6/7/2023 In the first quarter of 2023, First Horizon’s deposit outflow continued and its revenues and profits fell slightly. At 5% - to about $65 billion - First Horizon’s outflow of deposits in the fourth quarter of 2022 was far less than the $42 billion deposit outflow SVB suffered the day before the FDIC took it over. Like SVB, First Horizon suffered a decline in deposits. On March 2, Masrani told analysts he was fully committed to the deal and “This is a great transaction that offers scale and new capabilities to our US franchise,” noted Bloomberg. Trouble for the deal surfaced March 1 when First Horizon indicated regulators would not approve the merger by and the Memphis bank was negotiating with TD to extend the closing date. Moreover, more than 90% of SVB’s deposits were uninsured - whereas “less than half of First Horizon’s deposits were uninsured as of the end of December,” according to company filings. Most notably, the Memphis bank’s business is more diversified than SVB’s, which focused on venture-backed startups and wealthy individuals. This suggested the market had concluded TD would cancel or renegotiate the deal that it struck before the Fed started raising interest rates in March 2022, according to Bloomberg.įirst Horizon differs considerably from SVB. In March, First Horizon stock traded 40% below TD’s offer. ![]() The unraveling of the TD-First Horizon deal grew more likely after SVB collapsed. How SVB’s collapse compares to the TD-First Horizon deal failure The market keeps pointing its finger at the next weakest member of the banking herd - accelerating its demise. Stock price plunges signaled the next bank to fall.The threat of a downgrade in SVB’s credit rating was a brutal wakeup call that resulted in a rush sale of assets at a big loss - igniting a tweet-storm-fueled run on the bank. Their abrupt reactions triggered social-media fueled deposit runs.Their long-term success caused them to ignore regulatory warnings. As the Fed raised interest rates, bankers kept their heads in the sand. When rates rose, bankers reacted too slowly to warnings.Making loans to wealthy borrowers and incenting them to keep the money in the bank solved the problem of lending to collateral-free venture backed startups. ![]() With interest rates at roughly zero until March 2022, there was little reason for depositors to search elsewhere for yield. Bank executives failed to anticipate rising rates.
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