U.S. Bancorp on Tuesday at last joined the banking industry's latest merger wave by agreeing to an $8 billion deal for MUFG Union Bank's consumer business, the main segment of the U.S. operations of Japan's largest bank.

The purchase will increase U.S. Bank's loans and deposits by about 20% and give it a much larger presence on the West Coast, especially in California where it will rise to fifth place from 10th in market share.

And the deal came with a surprise announcement from U.S. Bank's top executives. In contrast to broad-based downsizing that accompanies most corporate mergers, they said there would be no layoffs of front-line workers at MUFG Union's branches.

"There are labor shortages across many industries, and attrition levels are higher across the banking industry," Andy Cecere, U.S. Bancorp's chief executive, said. "Retaining the employees is the right thing to do. It's also important because the front-line branch employees are the ones working most directly with customers."

While about 80% of MUFG Union's branches are within 3 miles of a U.S. Bank branch, executives said they expect there will be plenty of opportunities for branch employees even if some locations are eventually merged or closed.

"We will not be exiting any markets or reducing availability to branches or banking services in any low- and moderate-income neighborhoods," Terry Dolan, U.S. Bank's chief financial officer, said.

It's the largest deal by the Minneapolis-based banking company since 2001, when it merged with Milwaukee-based Firstar Corp. in a $21 billion transaction to become one of the nation's 10 largest banks. It's also the first purchase of another banking operation by U.S. Bank since 2014 when it bought Charter One branches in Chicago.

Formed by dozens of mergers when regulatory changes in the 1990s sparked consolidation, U.S. Bank today is the nation's No. 5 bank with $558 billion in assets. But until now, it has been on the sidelines of the multiyear wave of deals shaped by new competitive pressures in banking.

"I think a lot of investors have been waiting to see them do something," said Scott Siefers, banking industry analyst at Piper Sandler in Minneapolis. "USB is a very logical acquirer. They have a good track record, and they certainly have the valuation to do something."

In discussing the deal, executives from both U.S. Bank and MUFG emphasized that banks need to get bigger to develop digital services and to spread costs across a larger base of customers and assets.

"Scale is more important than it's ever been in the banking industry," Cecere said. "The ability to invest in technology capabilities, digital services, customer experience, it's all critically important. Banks are not just competing with banks, but they're competing with technology platforms and fintech players as well."

U.S. Bank will pick up about 1 million consumer customers and 190,000 small-business customers with MUFG Union. It will add $58 billion in loans to a base of $294 billion. It also gets $90 billion in deposits, lifting its base of $429 billion.

For Mitsubishi UFG, Japan's largest bank with more than $3 trillion in assets, the sale marks its exit from U.S. retail banking. It joins other huge global banks — including Spain's BBVA and Hong Kong's HSBC — that decided to leave the U.S. consumer business to U.S. banks this year.

Its MUFG Union business, based in San Francisco, had assets of $133 billion and about 300 branches in California, Oregon and Washington. But executives in Japan decided that wasn't enough to stay competitive in the U.S. Morito Emi, a managing director for corporate planning at its Tokyo headquarters, told reporters there Tuesday: "We can't succeed without a certain scale of business."

U.S. Bank will pay MUFG $5.5 billion in cash and 44 million of its shares, which had a value of $2.45 billion at Monday's closing price of $55.68. When the deal is done, MUFG will hold a nearly 3% stake in U.S. Bancorp.

U.S. Bank last year acquired a debt-servicing business from MUFG Union and also provides merchant processing services to MUFG Union. Cecere said executives from the two companies have been discussing a deal for several months.

"For their customers, they recognized we have a great set of products and services," Cecere said. "Because of our size, we just have more capabilities that they would take time to develop."

On Monday, federal regulators cited deficiencies in MUFG Union's technology security, and the company agreed to operate under a consent order with the Office of the Comptroller of the Currency.

The pandemic and recession last year dropped the number of bank industry deals by more than half in both volume and value. However, last year's deals included one of Minnesota's best-known banking brands, TCF, which was acquired by Ohio's Huntington Bancshares Inc. And 2020's largest deal in banking was an $11.6 billion purchase by PNC Financial Services Group — the Pittsburgh banking firm that is close to U.S. Bancorp in size — of BBVA's U.S. banks.

"Everybody is trying to understand what scale means in this industry," Siefers said. "You've got this unique situation where customer behavior is migrating very, very rapidly to a digital world, but banks are still expected to have meaningful, on-the-ground footprints in the form of branches. There's still a very heavy expectation of customer service."

Reuters contributed to this report.