PNC Financial-National City
By Laurie Kulikowski
Objective: To significantly expand its deposit base and branch franchise from a primarily mid-Atlantic operation heavily into the Midwest.
Impact: PNC more than doubled its total deposits via the acquisition, which involved a consideration of $5.6 billion in cash and stock as well as the raising of $7.6 billion in TARP funds. The combined company is now the fifth largest bank in the United States by deposits with $189 billion as of Sept. 30. Deposit strength is a key component of what's considered an institution's core funding, a metric that banks were forced to pay increasing attention to as the credit crisis intensified. PNC also became the fourth largest bank in terms of retail presence. It now has roughly 2,500 branches spread over the Mid-Atlantic and Midwest regions and Florida.
Impact: PNC more than doubled its total deposits via the acquisition, which involved a consideration of $5.6 billion in cash and stock as well as the raising of $7.6 billion in TARP funds. The combined company is now the fifth largest bank in the United States by deposits with $189 billion as of Sept. 30. Deposit strength is a key component of what's considered an institution's core funding, a metric that banks were forced to pay increasing attention to as the credit crisis intensified. PNC also became the fourth largest bank in terms of retail presence. It now has roughly 2,500 branches spread over the Mid-Atlantic and Midwest regions and Florida.
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Deposits aside, this deal has clearly added to the bottom line. Retail banking revenue, which includes fee revenue and net interest income, more than doubled from the year-earlier period. Also, net interest margin -- the difference between how much banks makes on lending to borrowers and paying out for deposits -- rose 30 basis points to 3.76% in its latest third quarter from a year ago.
PNC is still working to unwind its distressed assets portfolio, mostly of which came courtesy NatCity. Since the completion of the deal on Dec. 31, total assets in the distressed portfolio have fallen 18.7% to $22.3 billion. Of note is that the largest loan category for PNC is commercial loans, including a fair amount of commercial real estate loans. That could put the company in a precarious position as this area has already shown signs of stress, and could possibly lead to a third leg of the credit downturn.
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