H&R Block Banks On Getting Out of Banking
If at first you don't succeed, try, try again. U.S. tax prep specialist H&R Block will try once more to shed its banking business, announcing that BofI Holding will buy it for an undisclosed sum, though it anticipates that the deal will generate excess capital of about $200 million to $250 million.
Block originally announced the decision to sell its banking operations in October 2012 and attempted to unload the unit on Republic Bancorp last year, but the financial institution backed out at the last minute after failing to win regulator approval.
Because Block was deemed a savings-and-loan holding company by the passage of the Frank-Dodd Act of 2010, it came under strict Federal Reserve oversight and was required to hold significantly higher levels of capital than previously mandated. Moreover, the law weakened federal pre-emption rules that suddenly exposed similar non-bank "banks" to state consumer protection laws that created new levels of difficulty for compliance, which is why Block chose to exit the business.
In addition to acquiring H&R Block Bank, which offers traditional banking services including checking and savings accounts, IRAs, and CDs, BofI's Federal Bank unit will receive about $450 million to $550 million in customer deposits and balances on prepaid cards, while offering Block-branded financial services under a program management agreement between the two. BofI, which operates Bank of Internet USA and claims it's the oldest online bank in the country, expects to generate revenues of between $26 million and $28 million annually from that portion of the deal alone.
Block said it anticipates taking one-time charges of about penny per share and will recognize a loss of $0.03 per share this year on the unit's sale. Divesting itself of the bank will also reduce net income by $0.07 to $0.09 per share in fiscal year 2015. While certain bank assets won't be sold, Block will give up its bank charter once the deal is complete.
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The article H&R Block Banks On Getting Out of Banking originally appeared on Fool.com.Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends BofI Holding and owns shares of BofI Holding and Republic Bancorp. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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