EDITOR NOTE: PNC Financial just struck a deal to buy the US arm of Spain’s BBVA for $12 billion. This deal creates the fifth largest retail bank in the US--a bank with over $550 billion in assets, and a tie-up that’s comparable to those during the 2008 financial crisis. It’s too early to say what kind of growth trajectory this might bring PNC. And there isn’t enough information yet to assess the risks of this colossal tie-up. But here are the details. We’ll continue to follow the story for further insights.
With the Fed expected to continue suppressing lending margins for the foreseeable future, the slow creep of consolidation in the banking industry continued Monday morning when Pittsburgh-based PNC Financial announced that it had agreed to buy the US business of Spanish banking giant BBVA for $11.6 billion.
According to Reuters, the deal is the second-biggest banking-sector deal since the collapse of Lehman Brothers. The combined bank will have nearly $560 billion of assets (which should be enough to qualify it for heightened scrutiny from the Fed due to its systemic importance) and operate in more than two dozen states.
The move underscores how a loosening of financial regulations and lowering of corporate taxes under President Donald Trump has emboldened regional lenders to try and compete with JPM by joining forces with other smaller rivals. Monday's deal appears to be the first major banking deal in the US since the combination of BB&T and SunTrust in February 2019. That deal created the infamously-named Truist Financial. The combined PNC-BBVA lender will be America's 5th largest, compared with 6th-place Truist.
The deal, which is one of the biggest, if not the biggest, banking tie-up this year, was long-expected, and terms look reasonable, according to analysts at Jefferies analysts. The question now is how the combined entity will deploy its capital.
It's also the latest in a string of acquisitions for PNC, which the bank has used to grow its national footprint. It expanded its presence in the American southeast with its $3.45 billion buyout of RBC's US retail banking operation in 2011, and bought out National City bank, based in Cleveland, in 2008. With its acquisition of BBVA’s business, PNC will expand into Arizona, California, Colorado, New Mexico and Texas. The deal was in large part made possible by the bank's sale of its shares in BlackRock, the world's largest asset manager, which freed up $17 billion in capital to use for purchases of other regional lenders, according to PNC's chairman and CEO William S. Demchak.
BBVA shares soared on news of the deal, while shares of PNC are expected to slide when the US market opens.
Originally posted on ZeroHedge