A pair of state legislators on the Banking Committee are voicing concerns about Bridgeport-based People’s United Bank’s pending acquisition of Hartford’s United Bank – though there is little indication that that $759 million deal will not go through.
State Reps. Jason Doucette, D-Glastonbury/Manchester and Tom Delnicki, R-South Windsor have submitted comments to the commissioner of the state Department of Banking regarding the acquisition, which was announced in July. Doucette is also co-vice chair of the Banking Committee.
While the merger would help People’s United Bank increase its presence in the Connecticut and Massachusetts markets and reduce overhead costs, the legislators said they are worried it will have adverse economic impacts in eastern Hartford County due to the high saturation of the two banks in the area.
“We look forward to meeting with Mr. Doucette and Mr. Delnicki in the near future to discuss their concerns and share our view regarding the merger,” a People’s United representative told the Business Journal.
There are 42 People’s United Bank branches and 37 United Bank locations in Hartford County. Of primary concern to the lawmakers is the presence of seven People’s United and 15 United Bank branches in South Windsor, South Glastonbury, Glastonbury and Manchester.
“This merger has potential to decrease regional competition and eliminate branch locations and jobs,” Doucette said. “We support the growth of Connecticut’s banking industry, but we have an obligation to our districts and the community as a whole to express our concerns over how this merger may impact communities east of the Connecticut River. We ask that these two banking institutions work to mitigate potential consequences.”
“I am very concerned over this,” said Delnicki, a ranking member of the Banking Committee. “This merger will have a tremendous impact in my district, not only from the standpoint of people who utilize these two banks but also the people that work there. We are reaching a crisis situation in community banking or lack thereof – we must take action in the next session to address this issue.”
People’s United Bank and United Bank, formerly Rockville Savings Bank, rank second and fourth in Hartford County in terms of deposit market share amongst depository institutions yielding a resulting Herfindahl-Hirschman Index (HHI) calculation of 2,799.
HHI is a commonly accepted measure of market concentration that is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers. It can range from close to zero to 10,000.
After the merger, the HHI figure is predicted to increase 152 points. Generally, the legislators noted, when HHI increases between 100 and 200 points, concerns over competitiveness can arise, requiring scrutiny by regulatory authorities.
With decreased competitiveness and an agency’s increased market power, they said, prices for consumers could increase, and consumer choice could decrease.
Department of Banking Commissioner Jorge Perez has not commented on the letter. Fairfield County members of the Banking Committee – co-Chair Alexandra Bergstein, D- Greenwich; Andre Baker, D-Bridgeport; Kenneth Gucker, D-Danbury/New Fairfield/Ridgefield; and Charlie Stallworth, D-Bridgeport – did not respond to requests for comment.
At the time the transaction was announced, People’s United said it was expected to close during the fourth quarter, subject to regulatory approvals as well as the approval of United Financial Bancorp Inc. shareholders.