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Thursday, Aug 18, 2022

Footprint Overlap

The Sept. 21 announcement that US Bank will acquire Union Bank for approximately $8 billion promises a realignment of retail and business banking in the Valley region, as both institutions have a large presence, often in overlapping markets.

Owned by Minneapolis-based parent company U.S. Bancorp, US Bank has more than 2,000 branches nationally, while Mitsubishi UFJ Financial Group, the Japanese parent company of Union Bank, has 296 Union Bank branches in California, Washington and Oregon. 

In the Valley region, US Bank has 32 branches while Union Bank has 21 locations. Many of the US Bank locations are in the same submarkets as Union Bank offices (see table). It’s unclear which, if any, branches US Bank would shutter.

“We have not commented on branch count and don’t have anything to share at this point,” US Bank Head of Enterprise External Communications 

Jeffrey Shelman said. “We have committed to staying in every market that Union Bank serves and keeping all front-line branch employees.”

In the acquisition, which is expected to close in the first half of next year, U.S. Bancorp will pay $5.5 billion in cash and issue 44 million shares of its stock, giving MUFJ Financial Group a 2.9 percent stake in the company.

 In return, U.S. Bancorp will gain more than 1 million consumer customers and about 190,000 small business customers on the West Coast. The sale excludes Union Bank’s corporate and investment banking.  

“The acquisition of MUFG Union Bank underscores our commitment to strengthen and grow our business on the West Coast, make investments to serve customers and local communities and enhance competition in the financial-services industry,” U.S. Bancorp Chief Executive Andy Cecere said in a statement. 

For Mitsubishi UFG Financial Group, the sell-off of its U.S.-based retail banks comes amid a rough year when the pandemic forced the company in July to minimize more than 80 percent of its retail banking locations to cut overhead, keeping 45 locations open as full-service anchor branches.  


Expanding footprint 

Valley commercial real estate professionals said the US Bank takeover will yield a larger footprint in territories such as the San Fernando Valley and Santa Clarita as well as expanding the range of its financial services. 

Todd Nathanson, president at Encino-based illi Commercial Real Estate, which specializes in retail properties, said the US Bank acquisition has a precedent in the Valley region in which one large commercial bank absorbed another, creating a duplication of brick-and-mortar assets. 

“I don’t know what US Bank is going to do with the overlap, but (in 2008) we watched Wachovia fall to the wayside after being taken over by Wells Fargo,” Nathanson said. “We had an able financial institution take over (the Wachovia sites) even though there were existing Wells Fargos in

 the area.” 

Ultimately, an institution such as US Bank will want to increase the amount of its locations in the San Fernando and Santa Clarita valleys but will first have to reckon with Union Bank’s existing leases. 

“Being a voluntary acquisition, US Bank will be obligated to take over the lease obligations that Union has,” Nathanson explained. “Their primary focus has been on online banking and Union Bank has many branches that will give them a much stronger identity in the local communities.” 

John Loper, associate professor at USC Price School of Public Policy in Los Angeles, agreed that the geographical expansion, including on the West Coast, may be a key interest for U.S. Bancorp. 

“US Bank does not have as big a presence in California as (rivals) Bank of America or Wells Fargo,” Loper said. 

Bank of America has more than 4,300 sites and 17,000 ATMs nationwide. Wells Fargo has some 7,200 locations and 12,000 ATMs. JPMorgan Chase has 4,700 branches and more than 16,000 ATMS. 

With nearly $548 billion in assets, U.S. Bancorp has the No. 10 deposit market share in California but would move up to No. 5 after the acquisition. 

In theory, a consolidation of rival banks like US Bank and Union Bank gives Loper pause based on market share concerns. 

“The fewer banks, especially in commercial real estate lending, the harder it is to get a loan,” he said.

However, US Bank’s overtures do not to seem to signal anything troubling, Loper continued, because the two institutions bring different resources to the deal. In short, Union Bank is not known for the same types of financial products as US Bank.  

“Union Bank has done a lot of commercial lending in the past,” Loper said. “Union Bank was known for business banking. That is not anything the US Bank operation has a lot of because they acquired savings and loans.”

So in terms of loan portfolios, “there doesn’t seem to be a lot of overlap between Union and US Bank,” he added.

In November 2008, amid the Great Recession, U.S. Bancorp acquired the failed Downey Savings & Loan Association, which gained the financial institution 170 offices in California. 

However, U.S. Bancorp also has a long history of acquiring a variety of types of banks in California, including all 20 branches of Encino-based Pacific Century Bank in 2001; 57 retail banking branches of San Mateo-based Bay View Bank; and seven offices of Los Angeles-based Mellon First Business Bank in early 2008. In 2009, U.S. Bancorp picked up 68 office branches of Cal National Bank, 28 of San Diego National Bank and 17 Pacific National Bank branches. 

Whatever shape the purchase takes both locally and throughout California, U.S. Bancorp’s absorption of Union Bank will signify its largest since 2001, when the firm merged with Milwaukee-based Firstar Corp. for $21 billion. 


Retail landlord worries 

If US Bank does not assume all Union Bank locations, it could become a migraine for landlords stuck with former Union sites.

Illi’s Nathanson recalled a Wells Fargo location that was an anchor at a busy shopping center in San Gabriel that was “acquired by default,” replacing a shuttered Wachovia.  

“They basically changed the signage and converted the operation to Wells Fargo,” he said. “We had a good five to seven years of tenancy.” 

As the lease ended, Wells Fargo was willing to extend the lease based on landlord flexibility. 

“We couldn’t come to terms with them, so they ended up leaving,” Nathanson continued. He has since learned that undoing a bank’s buildout and removing a vault “is a very expensive endeavor.” 

Since Wells Fargo left five years ago, Nathanson is only now finding a new tenant. Prospective businesses had backed away from leasing the site. 

“Even though there was no Wells Fargo branding, if you walk into that branch, it was recognizable as a Wells Fargo,” he said. 


Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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