PNC Financial Services (PNC) - Get Report shares climbed on Wednesday after the Pittsburgh bank said it planned to sell its 22% stake in BlackRock BLK, bolstering its bottom line amid the coronavirus downturn and potentially positioning PNC for a major acquisition.
The stock at last check jumped 4.8% to $106.99 on news of the bank's planned sale of its lucrative investment in BlackRock, the world's largest asset manager.
PNC's 35 million shares of BlackRock are valued at $17.3 billion based on the New York asset manager's Monday closing price of $493.11.
BlackRock's shares at last check were off 3.7% to $475.06.
The sale would mark the end of an investment that began more than a quarter century ago. PNC bought BlackRock in 1995.
The investment has been a boon for PNC's bottom line as BlackRock has grown into an investment and asset management behemoth, but it has also created additional regulatory complexity for the bank, William Demchak, president and chief executive of PNC. indicated in a statement.
And if history - as well as the statement by PNC's CEO - is any indication, the bank may use the windfall from the sale to expand its footprint, analysts say.
During the 2008 financial meltdown, PNC made a major acquisition, buying National City Corp.
Another regional-bank acquisition may now be on PNC's menu as it seeks to seize opportunities created by the coronavirus-triggered downturn, Edward Jones analyst Kyle Edwards told Reuters.
Along with bolstering its balance sheet, the sale of the BlackRock stake would leave PNC "well positioned to take advantage of potential investment opportunities that history has shown can arise in disrupted markets," Demchak said.
On completion of the sale of the stake, BlackRock has agreed to repurchase $1.1 billion in stock in PNC.