Regional Banks Tumble Again, Paramount Minus, CEO on Biggest U.S. IPO Since 2021 5/4/23

Carl Quintanilla (0:00)

Market Moving Insight and Analysis join Jim Cramer, David Faber and me, Carl Quintanilla, on the opening bell hour of CNBC Squawk on the Street.

Good Thursday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. Free markets had a lot thrown at it this morning, more regional banking stress, an ECB hike, some weak guidance and semis, and a big IPO today. 10 year 334 is about a one month low. Our roadmap's gonna begin with the banks though. First Horizon plunging after this deal to be acquired by TD was scrapped.

David Faber (0:31)

Shares of PacWest also down sharply. That regional bank apparently weighing strategic options, including a possible sale.

And the Fed implements its 10th consecutive rate increase. Rates are now higher than they've been in 16 years. Opening the door to a pause though in its tightening cycle.

Carl Quintanilla (0:50)

First up though, we'll begin with TD Bank and First Horizon ending their $13.4 billion merger agreement, citing a lack of clarity on when they would get some of these regulatory approvals. On a call to investors this morning, First Horizon CEO Brian Jordan said his company tried everything to get the deal done.

Brian Jordan (1:08)

I'd like to be very clear. The fact that regulatory approvals were unable to be obtained by May 27th did not relate in any way to First Horizon.

We were informed by TD that they could not provide an updated timeline for an extension and they could not provide assurance of regulatory approval in 2023 or 2024 Let me assure you, we pursued every possible path to complete this transaction without success.

Carl Quintanilla (1:38)

A lot of discussion this morning, guys, about if this deal is running into friction, is there unnecessary pressure now being put on banks?

David Faber (1:45)

Yeah.

There's so many different things here that at least I can share from having spoke to people familiar with the situation, let's call it. First Horizon was never made aware of what the regulatory matters really were. Never. Now there's something called Capital Journal that's reported on the possibility it was a fair lending problem at TD. But my understanding is that they were never told that TD was uncommunicative when it came specifically to sharing the specifics of this regulatory impediment. That's number one. But number two, Jim, I think perhaps should be more concerning for the overall market, which is I'm told that, you know, the Fed said, we have confidence in you, First Horizon. You'll be okay if we don't let this deal happen. It'll be okay out there.

And that does lead one to wonder whether they fully appreciate the depth of this turbulence right now and what it could mean. It seems hard to imagine they can't, but you would again imagine in an environment like this where you have an opportunity to put a regional bank in the hands of a very safe acquirer that you would actually do so, that you would bend over backwards as a regulator to make sure that happened. And instead they send a different sign saying, hey, we're confident you'll be fine. We can't let this deal happen.

And as is at least at this point. And that's where we stand.

Jim Cramer (3:07)

I think you really great point. You know, I've been a big fan of J-PAL, but they seem to not understand the depths of the problems here.

Because First Horizon, they were regular. They came on every quarter. They were a good, solid regional. And considered to be one of the best and most conservative regionals. And if this is what's happening to First Horizon, then if you look at the rest of the regionals, I think you would say that they're in far more trouble than we realize. And I don't want to, I just can't over emphasize that First Horizon is far better than many of the banks that are in the key indices that are really crushing us. This is the, you have an S&P ETF, you have another ETF, and First Horizon is the star.

And so if First Horizon is in trouble, then I really think we have to kind of rethink how suboptimal the situation is with every other bank.

David Faber (4:06)

To be fair, the environment has obviously changed dramatically since this deal was first announced. So with it breaking, the stock was going to come off.

Jim Cramer (4:13)

But First Horizon was in every growth area in the country. Brian Jordan is one of the best lenders. I've chronicled his career for the last decade. He's as good as it gets. And the growth there was excellent. They were a very conservative bank.