PNC Bank to acquire BBVA for $11.6 billion

The deal will make PNC the fifth-largest bank in the US in terms of assets.



PNC Financial Services Group plans to acquire BBVA, a Spanish bank, in an all-cash deal worth $11.6 billion. The deal will make PNC the fifth-largest bank in the US in terms of assets.

This is the second biggest banking deal after the financial crisis of 2008. The buyout will mean PNC will now be worth $560 billion in assets and have a presence in two dozen states. BB&T Corp’s $28 billion all-stock acquisition of SunTrust Banks Inc and floating of the Truist Financial Corp was the biggest banking deal since 2008.

PNC Financial Services

The two banks were in talks for the deal for the past few weeks. The election results, which have put Joe Biden in the driving seat, will most likely see a Republican-dominated Senate, which means that regulatory rules governing corporate deals and taxes will remain the same.

The boards have approved the deal of both the companies and PNC expects it’s earnings to improve by 21% in 2022 with the addition of BBVA.

PNC ended its 22.4% stake in BlackRock, the investment fund giant, for $14.2 billion just six months ago due to the pandemic crisis and an overburdened balance sheet. It gained $4.3 billion after taxes on the sale, which it plans to use to fund the deal with BBVA, according to Reuters.

Bill Demchak, PNC’s chief executive, characterized the two deals as a “substitution” that would help the bank build a nationwide franchise. “We’ve managed to effectively trade the BlackRock ownership stake we had for a franchise that takes us coast to coast,” Demchak told the Financial Times. “BBVA is in the best markets in the country with substantial presence down in Texas, Arizona, California and in Denver, in Alabama, and down through Florida.”

In 2207 BBVA acquired Compass Bancshares Inc for $9.6 billion, as its US subsidiary. But the move proved to be costly and weighed down BBVA’s annual performance with poor returns. BBVA plans to pare down its presence in the United States with just some brokerage presence through its New York offices and maintain its stake in Propel Venture Partners.

The deal will likely close by 2021 and will have a 580 million euro ($687.18 million) positive impact on its net profit, BBVA said.

Demchak said the transaction would generate about $900m in cost savings related to the overlap of global management and regulatory costs. The bank expects 20 percent EPS accretion in the second year after the merger. The CEO said news of the vaccine giving positive results and the end of the elections also played their part. “We have in effect put a floor under the worst [Covid-19] downside, and the Federal Reserve and the US government have responded forcefully.”

Carlos Torres, BBVA’s executive chairman, said that the sale “enhances our already strong financial position”, adding that “we will have ample flexibility to profitably deploy capital in our markets, strengthening our long-term growth profile and supporting economies in the recovery phase, and to increase distributions to shareholders.”

Shares in BBVA surged almost 20 percent in early trading on Monday following the announcement of the deal.

PNC has a market value of $52 billion and has a massive presence in the Mid-Atlantic, Midwest and Southeast U.S regions. The deal now will allow it to expand in Texas and other sunbelt states. Bank of America, Citi, Evercore and PNC Financial Institutions Advisory acted as financial advisers to PNC and Wachtell, Lipton, Rosen & Katz was its legal counsel. J.P. Morgan Securities PLC represented BBVA as financial adviser and Sullivan & Cromwell LLP was its legal counsel.

Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

Monte dei Paschi performance below par in EU banks stress test

Monte dei Paschi performance below par in EU banks stress test

The depletion of capital at each bank under the test’s harshest scenario will be closely scrutinised, and could potentially lead to hostile takeovers
1 day ago
Nokia to launch T20 tablet with 10.36 inch display

Nokia to launch T20 tablet with 10.36 inch display

The Nokia T20 will sport a 10.36-inch display and will have 4 GB RAM along with 64 gigs of native storage.
3 days ago
Ford sees surprise Q2 profit despite chip shortage and manufacturing hassles

Ford sees surprise Q2 profit despite chip shortage and manufacturing hassles

“The business is ‘spring loaded’ for a rebound when semiconductor supplies stabilize and more closely match demand.”
3 days ago
Audi A6 E-tron Production Launch in 2023

Audi A6 E-tron Production Launch in 2023

Audi has confirmed that there will be multiple variants of the etron, including “basic versions optimized for minimum consumption and maximum range.
4 days ago
Royal Dutch Shell buyback lifts investor sentiment

Royal Dutch Shell buyback lifts investor sentiment

Royal Dutch Shell commences share buybacks before the end of this year while reducing its first quarter dividend to 16 cents per share, a 66% cut.
4 days ago
Citizens Financial to acquire Investors Bancorp in $3.5 billion NYC push

Citizens Financial to acquire Investors Bancorp in $3.5 billion NYC push

Citizens Financial Group, Inc. and Investors Bancorp announced today that they have entered into a definitive agreement and plan of merger in a cash-and-stock deal worth $3.5 billi
5 days ago