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October 24th, 2008

PNC Purchases Nat. City, Participates in TARP



PNC Corp. announced today that they will purchase regional bank National City Corp. for $2.23 a share, for a total of $5.2 billion. PNC has also announced their participation in the Troubled Asset Relief Program (TARP) today, as the Treasury Department plans on purchasing $7.7 billion of PNC’s preferred stock and warrants.

The acquisition of National City will increase our core deposit base to $180 billion, making PNC the fifth largest U.S. bank by deposits. At a time when core funding is key, we see our deposit strength as an important success factor. Upon closing the transaction, we will implement our successful business model and execute our strategies for managing risk, achieving cost efficiencies and growing high-quality revenue streams,” said James E. Rohr, chairman and chief executive officer of PNC in a press release today.

“The combined company will have greater scale and scope, enhancing service to our customers and communities and providing greater opportunities for our employees. This transaction is about two companies that fit well together in terms of geography, products and services,” said Peter E. Raskind, chairman, president and chief executive officer of National City.

In one fell swoop PNC has eliminated some of their competition, increased their deposit base, as well as expanded their geographical reach. Yet, could this deal negatively affect PNC? According to National Mortgage News, “PNC estimates that losses on NatCity’s remaining $4.5 billion non-conforming mortgage portfolio will total 43.5%. The remaining $10 billion third-party originated home equity portfolio is expected to see a loss ratio of 52.5%.”

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