UPDATE: PNC To Sell $3 Billion In Stock, Repay TARP Funds
February 02 2010 - 5:55PM
Dow Jones News
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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