PNC Is in Advanced Talks to Buy U.S. Arm of Spain's BBVA -- 3rd Update
November 16 2020 - 1:55AM
Dow Jones News
By Cara Lombardo and Liz Hoffman
PNC Financial Services Group Inc. agreed to buy the U.S. arm of
Spain's BBVA for $11.6 billion, the companies said Monday, in one
of the largest bank tie-ups since the financial crisis.
A deal would create the fifth-largest U.S. retail bank with more
than $550 billion in assets, a giant in an industry that has been
slow to consolidate.
The Wall Street Journal first reported Sunday that the two
companies were nearing a deal.
Acquiring BBVA's U.S. operations--BBVA USA Bancshares Inc. and
its subsidiary, BBVA USA--would bolster Pittsburgh-based PNC's
presence in fast-growing markets in the southeast and west. BBVA,
which in 2007 bought Alabama-based Compass Bancshares, has about
$100 billion of assets in the U.S. with branches across the
Sunbelt, including a major presence in Texas. PNC is strongest in
the mid-Atlantic, Midwest and Southeast.
PNC Chief Executive Bill Demchak said in September that
extending the bank's national presence would be the "first, second
and third objective" of any deal.
Big without being deemed too big to grow and with a strong
record on takeovers, PNC has long been seen as a likely
consolidator of the fragmented U.S. regional banking sector. It
stoked that chatter earlier this year when it sold its stake in
BlackRock Inc. for $15 billion, bringing in cash that could be
redeployed into an acquisition.
PNC said it expects the deal to be 21% accretive to earnings in
2022 and to replace net income from the passive BlackRock
investment.
Big bank mergers have been rare since the 2008 crisis, with few
major players willing to test the political waters and wary of new
regulations now applied to larger banks. What is more, the old
logic of adding adjacent branch networks is less powerful as
digitally savvy consumers are less tethered to their corner
branch.
But regional lenders are under pressure from national giants
like JPMorgan Chase & Co. and Bank of America Corp., which are
raking in deposits with digital apps, big marketing budgets and
coast-to-coast branch networks. Low interest rates have hit
especially hard at regional banks, which rely more on
bread-and-butter loans than rivals with Wall Street arms.
Deals are an obvious solution. By closing branches in
overlapping areas and trimming redundant technology budgets,
regional banks hope to merge their way to higher profits.
In October, First Citizens BancShares Inc. agreed to buy CIT
Group Inc. for $2.2 billion, creating a regional bank with more
than $100 billion in assets. BB&T Corp. and SunTrust Banks Inc.
merged last year into Truist Financial Corp., which is the
sixth-largest U.S. retail lender, but would be kicked down a notch
by a combined PNC-BBVA.
The sheer number of midsize banks in the U.S. has long bred
expectations of consolidation in the industry. There are at least
30 lenders with between $50 billion and $250 billion of assets.
The deal wouldn't be PNC's first acquisition of a foreign bank's
stateside operations. It bought the U.S. retail banking operations
of Royal Bank of Canada in 2012 for $3.45 billion. It also scooped
up a handful of struggling institutions during the financial
crisis, including National City Corp., which was pushed by
regulators to accept a deal.
It would signal a retreat from the U.S. for BBVA, formally
called Banco Bilbao Vizcaya Argentaria, Spain's second-largest
lender with a major presence in Latin America too. It paid about
$10 billion in 2007 to acquire Compass, which gave it a
long-desired foothold in the U.S., but BBVA has at least twice
written down the value of the business and earlier this year warned
of another charge as the coronavirus pandemic tore through the U.S.
economy.
European lenders that planted flags in the U.S. starting in the
late 1980s have failed to gain much ground. Royal Bank of Scotland
Group PLC sold out of Citizens Financial Group Inc. in 2015. HSBC
Holdings PLC said in February it would close one-third of its U.S.
branches.
Write to Cara Lombardo at cara.lombardo@wsj.com and Liz Hoffman
at liz.hoffman@wsj.com
(END) Dow Jones Newswires
November 16, 2020 01:40 ET (06:40 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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