PNC Buys BankAtlantic Branches - Analyst Blog
June 07 2011 - 10:54AM
Zacks
As part of its effort to expand, PNC Financial Services
Group Inc. (PNC) has completed the acquisition of 19
branches from a subsidiary of BankAtlantic Bancorp
Inc. (BBX). Additionally, two related facilities in the
Tampa - St. Petersburg area and associated deposits were also
handed over to PNC as part of the sale.
PNC shelled out a premium for the deposits in the transaction in
addition to the net book value of the acquired real estate and
fixed assets related to the branches and facilities.
A Win-Win Situation
It is a win-win situation for BankAtlantic and PNC. The
acquisition would establish PNC’s retail banking footing in the
Tampa Bay area. The company can also augment its other businesses
by leveraging those branches.
BankAtlantic had announced its intention to sell its Tampa
operations last August, to concentrate on its prime footprint in
Southeast Florida where it presently has 79 branches. Notably, the
company had incurred significant losses in the recent years from
its soured real estate loans.
BankAtlantic expects to record a net gain of approximately $38.2
million in connection with the transaction while its assets will
drop by approximately $336 million. Moreover, the deal is expected
to augment about 145 basis points to each of its regulatory capital
ratios.
Our Take
PNC’s continued strengthening of balance sheet, with focus on
risk and expense management, should propel its earnings ahead. The
company’s first quarter 2011 adjusted earnings of $1.57 per share
were well ahead of the Zacks Consensus Estimate of $1.37 per
share.
Results also compared favorably with the prior-year quarter’s
adjusted earnings. A substantial contraction in the provision for
credit losses, lower non-interest expenses, a strong balance sheet
and improved credit quality were attributed to the results.
However, revenues were lower due to a challenging operating
environment. Then again, the recent dividend increase and share
buyback plan should inspire investors’ confidence on the stock.
Moreover, benefits from the 2008 National City acquisition
continue to exceed the company's expectations. We also believe that
the latest acquisition spree would also be accretive to its
revenue.
However, we expect the top line to remain restricted in the near
term, with continued soft demand for loans and a low interest rate
environment. Regulatory initiatives also remain headwinds to both
top and bottom lines.
PNC shares maintain a Zacks #3 Rank, which translates into a
short-term Hold recommendation. Considering its fundamentals, we
also have a Neutral recommendation on the stock.
BANKATLANTIC -A (BBX): Free Stock Analysis Report
PNC FINL SVC CP (PNC): Free Stock Analysis Report
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