CIT Group closes $3.4-billion purchase of OneWest Bank in Pasadena
Southern California’s banking landscape shifted again Monday when CIT Group Inc. completed its $3.4-billion purchase of Pasadena-based OneWest Bank.
The deal is part of an exodus of bank ownership involving some of the state’s best-known financial institutions — names such as Bank of America, Security Pacific and Great Western that have moved away or disappeared in the decades-old churn of banking mergers.
In this case, the bank stays put even though the parent company is based in New York.
CIT Group is a national provider of commercial lending and leasing services that announced plans to acquire OneWest for cash and stock a year ago. Federal regulators approved the deal last month after CIT executives pledged $5 billion over four years in loans and other services to poor and minority communities.
OneWest, with 70 retail branches in Southern California, will continue operating under that name as part of CIT’s CIT Bank division, which has operated largely online. That division will now be based at OneWest’s Pasadena headquarters.
The merger will result in a “minimal” number of job cuts among OneWest’s 1,700 employees, John Thain, CIT Group’s chairman and chief executive, said in a telephone interview.
He declined to provide a specific number for the reductions. “There will be some because there’s some duplication, but that’s not the driver of the transaction,” Thain said. “There’s not that much overlap.”
CIT also plans “no branch closures at all,” Thain said. The combined bank will have about $65 billion in assets and $30 billion in deposits.
OneWest already had changed its website Monday, noting that while it was a division of CIT it was “proud to be Southern California’s hometown bank.”
But the deal means yet another bank holding company no longer is based in California.
And another California bank is set to join the list. City National Corp., based in Los Angeles, is awaiting approval of its $5.4-billion purchase by the Royal Bank of Canada.
The nation’s biggest banks have a huge presence in California, but only San Francisco-based Wells Fargo & Co. remains headquartered in the state, with all the prestige and local philanthropy that comes with a main office.
Bank of America famously got its start in San Francisco in 1904 as Bank of Italy, which helped rebuild a city ripped apart by the 1906 earthquake. In 1998, NationsBank purchased Bank of America, took the BofA name and set up a new company in North Carolina.
Others, such as Security Pacific, Great Western and Home Savings, were merged out of existence.
The trend reflects two decades of bank consolidation stemming in part from major shifts in the economy, such as the severe recession of a few years ago.
In the case of OneWest, though, the bank was sold mainly because “the investors wanted to get their money out,” said Bert Ely, a banking consultant in Alexandria, Va. “It was a very logical progression.”
An investor group led by hedge fund operator Steven Mnuchin, who had been chairman of OneWest’s parent company IMB Holdco, created OneWest from the remains of IndyMac Bancorp.
IndyMac was an aggressive mortgage lender that the Federal Deposit Insurance Corp. seized in July 2008 as the mortgage and housing crisis, which would usher in the recession, took hold.
There was a classic run on the bank before regulators moved in, with photos broadcast worldwide showing panicked depositors standing outside IndyMac’s branches.
When IndyMac later was auctioned off by regulators, the Mnuchin group put up $1.5 billion to buy much of IndyMac — effectively doubling the return on that purchase price with the CIT deal. CIT is paying $1.9 billion in cash and $1.5 billion of CIT stock.
The group also included billionaire computer entrepreneur Michael Dell and hedge-fund operators George Soros and John Paulson.
Mnuchin, who was executive producer of such movies as “American Sniper,” joined CIT as vice chairman and a director as part of the merger.
Joseph Otting, who had been OneWest’s chief executive, became co-president of CIT Group and chief executive of CIT Bank.
The deal gained regulatory approval after CIT and OneWest assuaged critics’ concerns over whether CIT would satisfy the requirements of the 1977 Community Reinvestment Act, which requires banks to support all segments of their communities.
At a hearing before federal regulators in February, CIT’s Thain said the combined bank would provide “a significant increase” in lending, philanthropy and other support for lower-income and minority communities.
“We have set forth aggressive goals for community investment and development activities in Southern California,” Thain said then, “including targeting $5 billion of community-related activities over the next four years.”
The deal drew support from such advocacy groups as the National Asian American Coalition and the Los Angeles Latino Chamber of Commerce.
To celebrate the merger, Thain was scheduled Tuesday to attend an event at a Panorama City supermarket being hosted by the National Asian American Coalition.
CIT pursued OneWest not only because it swelled CIT’s deposit base but because OneWest’s retail deposits “give us a more diverse and lower-cost source of funds” for lending compared with other sources, such as commercial financing and brokered deposits, Thain said.
OneWest also offers home loans, wealth management and other services that mean “we can become more like a true regional commercial bank,” he said.
CIT Group’s shares edged up 4 cents to $47.08 on Monday.