H&R Block Drops Most in Two Years on Delay in Bank Sale

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H&R Block Inc., the tax preparer seeking to exit Federal Reserve oversight, sustained its biggest decline in more than two years after the sale of its banking unit to BofI Federal Bank was delayed again.

Shares of the company, which gained 9 percent this year through Oct. 3, fell 6.4 percent to $29.64 at 11:48 a.m., the biggest decline since April 2012.

Because of the regulatory setback, H&R Block will continue offering financial-services products to clients through the unit during the coming tax season, the Kansas City, Missouri-based company said yesterday in a statement. The firm had predicted in April that it would be done in time for the tax season.

“I am obviously extremely disappointed, and frankly I am surprised in this development,” Chief Executive Officer Bill Cobb, 58, said on a conference call today. “However, I want to be very clear: We remain committed to exiting our bank.”

Cobb said “there can be no assurances” regarding the likelihood of the sale eventually being approved, though he said “we feel that on its merits” the transaction will go through.

The timing of H&R Block’s share buybacks may be pushed back as a result of the delay, Mark Palmer, an analyst at BTIG LLC, said in a note.

“We infer it unlikely HRB will be returning capital to shareholders within the next few quarters,” Scott Schneeberger, an analyst at Oppenheimer & Co., said in an e-mailed note, referring to H&R Block by its stock symbol.

Republic Bancorp

The deal is H&R Block’s second attempt to sell the unit after the Fed proposed rules requiring savings and loans to hold more capital. An agreement with Republic Bancorp Inc. collapsed last year as that firm withdrew a regulatory request to convert to a national bank from a state bank. Now, approval for the sale to BofI isn’t expected in 2014, H&R Block said.

“While the regulatory approval process has taken longer than expected, we are encouraged by the progress made to date,” BofI Federal Bank CEO Greg Garrabrants said in a separate statement.

BofI, based in San Diego, fell 3.3 percent to $71.90.

The Office of the Comptroller of the Currency, which Cobb said needs to approve the sale, declined to comment.

(Updates with analyst’s comment in sixth paragraph.)
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