PNC Financial Services Group Inc., U.S. Bancorp and Toronto-Dominion Bank are among companies that may benefit as Bank of America Corp. sells assets to raise capital.
PNC this year pushed deeper into the Southeast, a Bank of America stronghold, with a deal to purchase Royal Bank of Canada's U.S. retail unit. U.S. Bancorp is investing in corporate banking and wealth management, a domain of B of A's Merrill Lynch, as it increases offerings for high-net-worth clients. Toronto-Dominion agreed last month to buy Bank of America's credit card business in Canada and also has expanded in the U.S.
"The winners out of this will be those banks that aren't in the 'too big to fail' category," said Blake Howells, an analyst at Becker Capital Management Inc. in Portland, Ore., which oversees $2.2 billion, including Bank of America shares. Regional lenders and banks aiming to round out product lines will benefit most, he said.
Bank of America Chief Executive Brian Moynihan is selling businesses to build capital as housing losses drain resources and regulators tighten rules on how lenders manage funds. The Charlotte, N.C., company also announced plans this week to cut 30,000 jobs in the next few years to trim costs and reverse the decline of its shares.
Moynihan aims to boost investor confidence after the stock slid 54% since he became CEO in January 2010. His tenure includes posting a record $8.8 billion quarterly loss, committing $30 billion to clean up faulty mortgages and selling about $40 billion of assets and preferred shares.
Jerry Dubrowski, a Bank of America spokesman, declined to comment when asked how the lender's overhaul may benefit competitors.
U.S. Bancorp and PNC may be poised to expand, Howells said, as Bank of America shrinks and cedes its title as the biggest U.S. lender by assets.
Other so-called superregional banks could seize the opportunity, according to Rebel Cole, a former Federal Reserve economist and now a finance professor at DePaul University in Chicago.
"The superregionals probably have the most to gain," Cole said in a telephone interview. "I don't see where the other big banks — the four behemoths — will do anything, and if anything they may see the handwriting on the wall and get smaller themselves."
PNC, of Pittsburgh, which bought National City Corp. of Cleveland in 2008, paid less than tangible book value to RBC for 420 branches in Alabama, Florida, Georgia, the Carolinas and Virginia.
"Our planned acquisition of the RBC Bank provides us with significant opportunities to increase clients and cross-sell products and services," PNC's chief executive, James Rohr, said Sept. 12 at an investor conference in New York. The deal is expected to closed in March.
Rohr declined to answer analysts' questions about whether the bank was picking up customers from weakened rivals. Spokesmen for PNC, U.S. Bancorp and Toronto-Dominion would not discuss whether their companies expect to benefit from Bank of America's retrenchment.
U.S. Bancorp CEO Richard Davis earlier this year highlighted the Minneapolis company's recent expansion in corporate banking.
"The coup de grace has been the absolute and undeniable growth of our corporate bank," Davis said during a June 2 investor presentation. "We are now a very high-quality national — even global — corporate bank."
A month later, Davis said the lender would not make an acquisition so big that it would alter the way the company operates or manages its balance sheet.
The ranks of expanding lenders include Capital One Financial Corp. The McLean, Va., company agreed in June to purchase ING Group NV's U.S. online bank. The acquisition would make Capital One the fifth-largest U.S. bank by domestic deposits. Last month the company said it had agreed to acquire about $30 billion of credit card assets from HSBC Holdings PLC of London.
Bank of America is also divesting non-U.S. credit card assets. It will sell the Canada card unit, with $8.6 billion in loan balances, to Toronto-Dominion and plans to get out of the U.K. and Ireland, the company said in August. Its FIA Card Services unit sold a $1 billion portfolio to Regions Financial Corp. of Birmingham, Ala., the tenth-largest U.S. bank by deposits, and $200 million in loan balances to Sovereign Bank, a unit of Banco Santander SA of Madrid.
Moynihan also is overhauling home lending operations, which posted a $14.5 billion second-quarter loss. In February he split the mortgage division, separating distressed loans from performing mortgages and new lending. Bank of America said Aug. 31 that it planned to sell or shut its correspondent mortgage unit, which buys loans from smaller companies.
That may benefit the lender's biggest rivals, including JPMorgan Chase & Co. and Wells Fargo & Co.
"On the mortgage side it's pretty clear JPMorgan and Wells Fargo are the winners," Howells said.
Wells Fargo, of San Francisco, had 28.4% of the residential mortgage market in the first quarter, up from 22.5% in the year-earlier quarter. New York-based JPMorgan Chase made 12.8% of U.S. home loans, up from 9.6% a year earlier, according to data compiled by Bloomberg. Bank of America's share declined to 19.4% from 20.9%, according to the data.
"We just don't need to be the biggest," Moynihan said in a Sept. 6 interview. "It's time to simplify the organization, streamline the organization and make sure our business processes are relevant when you have a smaller, more focused company."
JPMorgan Chase became the largest U.S. bank by deposits in the second quarter with $1.05 trillion, surpassing Bank of America's $1.04 trillion. New York-based Citigroup Inc. ranks third with $866.3 billion, followed by Wells Fargo with $853.6 billion.
MetLife Inc., the insurer whose banking unit has increased mortgage lending, also may benefit. MetLife Bank agreed in June to become the "preferred mortgage lender" of KB Home, replacing Bank of America in a mortgage distribution deal. KB Home, a builder based in Los Angeles, targets first-time homebuyers.
"Whoever is the most aggressive about gaining market share will benefit," said Christopher Thornberg, co-founding principal of Beacon Economics LLC, a Los Angeles consulting firm. "You can pick up assets at a good price and clean them up and generate value."