PNC projects that the deal, to be completed by the end of this year, would generate a 15 percent rate of return and boost per-share results in its second year. The bank will incur $2.3 billion in merger costs and $1.2 billion in other expenses.
National City branches will assume the PNC name. The company headquarters will remain in Pittsburgh.
During a conference call Friday, PNC Chief Executive James Rohr told analysts the bank expects to record $19.9 billion in write-downs on National City loans. PNC may also consider issuing $1 billion in common equity "in the foreseeable future," but only after speaking with top shareholders.
National City posted a $729 million quarterly loss earlier this week. Its chief executive, Peter Raskind, told Reuters on Tuesday that the economic environment "probably gets worse before it gets better."
Raskind will join the combined bank's board, along with one other National City director.
PNC's Rohr said Treasury's offer to inject capital made the deal for National City attractive. With the new funds, the combined company's Tier 1 capital ratio would be a healthy 10 percent.
PNC faced competition for National City, Rohr said, adding that the bank had scrutinized a deal with National City "for quite some time," he said. He declined to say whether Treasury forced PNC to acquire its weaker rival.
Typically bank mergers trigger antitrust provisions that require branch and business sales, but Rohr said concentration issues exist in less than 3 percent of the combined deposit base. Currently, the two banks combined have $180 billion in deposits.
Citigroup, JPMorgan Chase & Co, and Sandler O'Neill advised PNC, while Goldman Sachs advised National City.
No comments:
Post a Comment