Eastern Bank CEO Bob Rivers speaks at a 2019 event celebrating the bank’s social justice work. Photo by Marilyn Humphries | Courtesy of Eastern Bank
The head of Eastern Bank says its proposed merger with Cambridge Trust will create a local winner.
“The Eastern-Cambridge combination is a powerhouse,” Rivers argued to investment analysts in a conference call Wednesday morning. “I expect we’ll soon be a challenger for the third-biggest deposit position in the Boston [area].”
The all-stock transaction, valued at $528 million, will create a $27 billion-asset bank, roughly $7.6 billion more than the next-closest, locally-based bank, $19.41 billion-asset Rockland Trust Co.
The combined entity would also have $22.76 billion in deposits according to FDIC figures, making it the fourth-largest bank by deposits in the Greater Boston, after Bank of America with its $103.1 billion, Citizens with its $53.2 billion and Santander with its $23.9 billion and ahead of JPMorgan Chase with its $19.6 billion, TD Bank with its $18.3 billion and Rockland Trust with $12.7 billion.
Rivers and Eastern Bank CFO Jim Fitzgerald said the combined bank would aim to grow its earnings, with impacts being fully realized in 2025 once the merger, which would close in the first quarter of 2024 if approved by regulators and shareholders, is completed and the two organizations integrated.
“The combined company has better scale and financial returns than each bank,” Rivers said, noting that the deal will enable Eastern to make more investments and better compete for market share, plus support current clients’ growth.
Presentation slides shown to investors Wednesday predicted a 25 basis-point increase in Eastern’s net interest margin to 3.05 percent, with Eastern’s total cost of deposits rising from 1.22 percent to 1.32 percent thanks to Cambridge Trust’s 1.78 percent cost across its $4.4 billion in deposits. The slides also predicted a 50 percent increase in net income to between $290 million and $295 million, thanks to a big bump in fee income from Cambridge Trust’s wealth management operations, which will be combined with Eastern’s smaller wealth division under the Cambridge Trust brand and leadership in the third quarter of next year, along with Cambridge Trust’s private banking operations.
In addition, the bank’s efficiency ratio – a key performance metric that compares operating expenses and total income – would shrink from 60 percent to 50 percent under the deal, essentially showing the combined entity will be doing more with less, by Eastern executives’ reckoning.
