UPDATE: PNC To Sell $3 Billion In Stock, Repay TARP Funds

PNC Financial Services Group Inc. (PNC), the Pittsburgh-based regional bank, said Tuesday it will sell $3 billion in new stock and repay the $7.6 billion in public support it accepted from the U.S. government's Troubled Asset Relief Program, or TARP.

Until the transaction closes later in February, PNC remains the largest U.S. commercial bank to carry government support after larger rivals, including Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC), struck deals last year to exit the program. The U.S. government invested hundreds of billions dollars in the financial system in 2008 and 2009 as the credit crisis ballooned and threatened the existence of large and small institutions.

PNC had said for months that it would try to avoid hurting shareholders as it exited TARP, which requires the permission of government officials. Other banks exited the program by selling billions of dollars in new shares, which diluted the stakes of existing stockholders. Some banks complained that participating in the government program included onerous restrictions on executive compensation, making it harder for them to keep and attract talent.

PNC Chief Executive James Rohr told investors in May: "The idea of penalizing the shareholder to get out of executive compensation rules alone, I think, is a mistake." The bank said repeatedly it would repay TARP "in a shareholder-friendly way."

Still, PNC will raise $3 billion in new stock to pay off its own TARP exit. The bank's stock was recently down 0.7% at $54.25 in after-hours trading. PNC also said it will issue $1.5 billion to $2 billion in debt.

As part of its plan to exit TARP, PNC said in a statement Tuesday that government officials will require it to close its sale of PNC GLobal Investment Servicing to Bank of New York Mellon Corp. (BK). PNC announced earlier Tuesday that BNY Mellon will purchase the business from PNC later this year for $2.3 billion in cash. If the bank doesn't close that transaction, it will be required to raise another $700 to $1.6 billion, either through selling stock or assets.

Like Wells Fargo, PNC grew during the financial crisis by purchasing a crumbling rival. PNC bought Ohio-based National City Corp. and Wells Fargo bought Charlotte-based Wachovia Corp. in late 2008.

-By Marshall Eckblad and John Kell, Dow Jones Newswires; 212-416-2156; marshall.eckblad@dowjones.com

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