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

Renewable Energy Adoption will Need to Change Gears to Meet Net-Zero

Renewable Energy Adoption will Need to Change Gears to Meet Net-Zero

Renewable energy adoption pace is good, but it is still falling short of meeting net zero emission rate, says the latest International Energy Agency’s (IEA) annual report. Higher
23 hours ago
America is Losing its Appetite for Plant-Based Meat

America is Losing its Appetite for Plant-Based Meat

Most meat in 2040 will not come from animals, says report. However, the recent decline in sales of plant-based meat fell by 1.8 percent compared to the year before, taking declines
2 days ago
Fusion startup raises $1.8 billion to give us unlimited clean energy

Fusion startup raises $1.8 billion to give us unlimited clean energy

Commonwealth Fusion Systems secures more than $1.8 billion in Series B funding to commercialize fusion energy. The funding round was led by Tiger Global Management with participati
3 days ago
Omicron might push inflation, says OECD

Omicron might push inflation, says OECD

The latest Coronavirus variant, Omicron, which is believed to be more transmissible and severe, might derail growth and recovery and raise costs, according to the Organization for
3 days ago
Who is Parag Agrawal, Twitter’s new CEO?

Who is Parag Agrawal, Twitter’s new CEO?

Indian-born Parag Agrawal took over as the CEO of Twitter as co-founder Jack Dorsey stepped down for the second time in his career. Agrawal is the fourth person to take the reins a
4 days ago
Goldman Sachs rolls out paid leave for pregnancy loss

Goldman Sachs rolls out paid leave for pregnancy loss

Goldman employees are now eligible for 20 days of paid leave for a miscarriage or stillbirth. The investment banking giant is also increasing its retirement fund matching contribut
4 days ago