CIT Group Inc.’s $3.4 billion acquisition of OneWest Bank won approval from U.S. regulators after being delayed for almost a year amid complaints that the combination could create another too-big-to-fail lender.
The merger, one of the biggest in the banking industry since the 2008 credit crisis, will result in a combined business called CIT Bank, according to statements Tuesday from the Office of the Comptroller of the Currency and Federal Reserve. In approving the deal, the OCC terminated an enforcement action against Pasadena, California-based OneWest stemming from a 2011 settlement over foreclosure practices.
Shares of CIT rose as much as 4.6 percent to $49.27, the most in about a year, after the news was announced. The stock price has increased about 0.7 percent so far this year.
“We welcome OneWest employees to CIT and we look forward to working with them to meet the needs of small and middle-market businesses, the transportation industry, real estate sector and our retail bank customers,” CIT Chief Executive Officer John Thain said in a statement. The deal is expected to close on Aug. 3, CIT said.
CIT’s takeover of OneWest, which is backed by billionaires John Paulson and George Soros and overseen by Chairman Steve Mnuchin, a former Goldman Sachs Group Inc. executive, signals a rebound for Thain and a sign that larger bank deals could accelerate. Thain, who joined CIT in 2010, was CEO of Merrill Lynch & Co. before it was sold to Bank of America Corp.
Bank acquisitions have slowed since the credit crisis amid concerns that more lenders would be seen as systemically important and draw additional scrutiny from regulators. For example, M&T Bank Corp.’s takeover of Hudson City Bancorp, the largest pending bank merger, has been delayed four times since it was announced in 2012, amid probes of M&T’s money-laundering controls.
The merged CIT will have about $70 billion in assets, according to the Fed, putting it above the $50 billion threshold that triggers increased oversight under the Dodd-Frank Act.
The CIT deal was delayed by objections from low-income borrower advocacy groups. The agencies earlier this year held a hearing in Los Angeles to collect information on how the proposed deal might affect communities after groups including the California Reinvestment Coalition raised concerns about how the combined business could be another “too-big-to fail” bank.
“The OCC and the Fed just created a systemically important financial institution via merger, for the first time ever,” Paulina Gonzalez, executive director of CRC, said in an e-mailed statement. “We can only hope that communities, taxpayers, and the FDIC won’t be left with a bad check.”
OneWest was known as IndyMac Bancorp before it went bankrupt in 2008. IndyMac made mortgages to people without verifying their income, which prompted the Federal Deposit Insurance Corp. to take control of the lender in 2008. IndyMac is the second-largest U.S. commercial bank failure on record, behind the collapse of Washington Mutual Inc.
(A previous version of this story was corrected to fix the location of the hearing in the eighth paragraph.)