Four years into his tenure as the leader of U.S. Bancorp, Andy Cecere made the decision that likely will define the rest of it: the purchase of California-based MUFG Union Bank.
The $8 billion deal is the biggest in two decades for U.S. Bank. When complete next year, it will immediately increase the Minneapolis company's size by 20% and shift its operational center of gravity from the Midwest to the faster-growing West Coast and Rocky Mountain states.
Cecere was chief financial officer at U.S. Bank when it executed the giant merger with Firstar Corp. in 2001, a deal that catapulted it into one of the nation's 10 largest banks. As chief executive since 2017, Cecere has applied the precision of his finance background in his deal making.
In an interview, he described the financial and strategic standards the company first applies when deals are on the table. Then, Cecere said, he considers what U.S. Bank may miss out on by spending the money and dedicating the time to make a deal work.
"Any opportunity has to be meaningful," Cecere said. "An acquisition is something you have to be focused on, and you want to make certain the focus is worth the outcome."
For investors in U.S. Bank, the deal announced Tuesday ended a guessing game about its direction. For several years, numerous sizable regional banks bought others to better cope with the low interest rate environment and rising costs of technology.
In Minnesota for instance, the state's No. 3 bank, TCF Financial, was acquired by Detroit's Chemical Financial in 2019, and then the combined firm was bought by Columbus, Ohio-based Huntington Bancshares last year.
The state's No. 4 bank, Bremer Financial, is riven by a debate between executives and trustees about whether it should be sold. Their dispute will play out in a St. Paul court next week.
Executives at such companies feel pressure to keep up with country's four giant banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — as well as financial technology upstarts and tech platforms from Apple, Google and Facebook.
Amid such moves, investors and analysts routinely asked Cecere and other U.S. Bank executives to describe their approach. And often, a response would include the word "discipline," a term the company's executives also frequently use in discussions about lending.
"Discipline is a hallmark of U.S. Bank, and it informs how we approach both growth opportunities and risk management," Cecere told analysts in a conference call about Tuesday's deal. "I believe that discipline is exemplified by our acquisition track record, both in terms of the deals we've done and those we have not."
U.S. Bank's last purchase of bank assets came in 2014, when it bought some of Charter One's Chicago-area branches. Since then, U.S. Bank has bought and sold businesses in insurance, credit card, business services and banking technology.
MUFG Union, the consumer-facing unit of Mitsubishi UFG, Japan's largest bank, came on U.S. Bank's radar more than a year ago when the two firms did another, much smaller transaction.
California is already the largest market for U.S. Bank, but the MUFG Union's branch network will extend U.S. Bank's reach. While some branches may be closed after the deal is done, executives signaled there would not be as much trimming as is typically seen. And amid a tight labor supply, U.S. Bank promised not to cut the jobs of any front-line MUFG Union employees.
California is wealthier and faster-growing than most of the 26 states where U.S. Bank has branches, and it also is the only place where all four of the big national banks have sizable operations.
In Minnesota, by contrast, only Wells Fargo operates on the scale of U.S. Bank, while JPMorgan Chase and Bank of America have smaller operations and Citibank is not a presence.
"This is financially appealing and it improves our growth prospects in terms of not just the scale, but the opportunity to offer more to Union Bank's current customers," Cecere said.
One immediate challenge is an update to MUFG Union's information technology and security systems. On Monday, federal banking regulators imposed a consent order on the firm over concerns about its IT risk management.
U.S. Bank executives said they expect to quickly resolve that. "We have the opportunity to be able to lift and shift all of their customer activity onto our system, so we're not retaining any of their systems," Terry Dolan, U.S. Bank's chief financial officer, said.
Biggest Minnesota deals
Here are the largest business deals involving Minnesota-based companies, which are highlighted in bold lettering. The list includes deals in which local firms were both doing the buying and getting acquired.
- Medtronic Inc. buys Covidien, $42.7 billion, 2014
- Norwest Corp. buys Wells Fargo & Co. (takes Wells Fargo name), $34.4 billion, 1998
- Abbot Labs buys St. Jude Medical Inc., $30.5 billion, 2016
- Firstar Corp. buys U.S. Bancorp (takes U.S. Bancorp name), $21 billion, 2000
- St. Paul Cos. buys Travelers Property Casualty Corp., $16.1 billion, 2003
- UnitedHealth Group buys Change Healthcare, $14.3 billion, 2021
- UnitedHealth Group buys Catamaran Corp., $13.2 billion, 2015
- Sherwin Williams Co. buys Valspar Corp., $11.2 billion, 2016
- General Mills Inc. buys Pillsbury Co., $10.5 billion, 2000
- First Bank System buys U.S. Bancorp (takes U.S. Bancorp name), $8.9 billion, 1997
- Ecolab Inc. buys Nalco Holding Co., $8.1 billion, 2011
- General Mills Inc. buys Blue Buffalo Pet Products, $8 billion, 2018
- U.S. Bancorp buys MUFG Union Bank, $8 billion, 2021
- Northern States Power (now Xcel Energy) buys New Century Energies Inc., $7.9 billion, 1999
- UnitedHealth Group buys PacifiCare Health Systems, $7.4 billion, 2005