H&R Block Eyes Exiting Savings & Loan Business

H&R Block (NYSE: HRB  ) is consulting with the investment bank Goldman Sachs (NYSE: GS  ) about how it can continue to offer financial products and services to its customers without being regulated as a savings and loan holding company.

H&R Block is primarily a tax preparation company, but because its H&R Block Bank is a federal savings bank, the larger company is classified as a savings and loan. Due to changes in regulation set to go into effect because of the Dodd-Frank Act, the Federal Reserve will soon impose higher capital requirements on savings and loan companies.

"The company believes the regulatory constraints that would result from these proposed rules and the manner in which the company believes they will be implemented are inconsistent with its strategic plans, operational needs, and growth objectives," the company noted in a press release.

In an SEC filing, the company went a bit further, saying "while our current belief is that dividends at current levels would continue to be permitted as long as HRB Bank remains well capitalized, the Federal Reserve will closely supervise and likely restrict other capital allocation decisions, including stock repurchases, acquisitions, and other forms of strategic investment."

H&R Block does not expect this to affect its fiscal 2013 earnings; no details were released about what strategy the company was considering. Existing products and services will remain in fiscal 2013 and they remain a "key part" of the company's strategy, it said.

Shares in the company were down more than 4% on the news in early trading on Wednesday.

John Divine has no positions in the stocks mentioned above. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Goldman Sachs Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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