PNC Bank Corp. intends to let Hilliard-Lyons Inc. take the wheel of its retail brokerage business once its deal for the Louisville, Ky., securities firm closes at yearend, a senior executive said.
PNC announced Aug. 20 that it would buy the firm, which has 84 offices in 12 states, for $275 million.
Thomas K. Whitford, who as chief executive of PNC Private Bank oversees all of the Pittsburgh banking company's retail investment activities, said he will supervise Hilliard chairman Jim Stuckert.
Mr. Stuckert is to supervise PNC Brokerage president Michael Mortenson, who now reports directly to Mr. Whitford.
However, many of PNC's 242 brokers would continue to operate under the PNC Brokerage banner and work in PNC branches. Those with affluent clients will be assigned to Hilliard-Lyons, Mr. Whitford said; PNC officials declined to disclose how many brokers would make the switch.
PNC's decision to put its brokerage under a firm it plans to buy is not unprecedented. Fleet Financial Group Inc. made a similar decision when it bought Quick & Reilly Group. But other banking companies that have bought securities firms, including First Chicago NBD Corp. and First Union Corp., have opted to keep the brokerages separate.
Banks consider factors such as the size, reputation, and clientele of their own brokerages and the ones they buy before integrating brokerage acquisitions.
Mr. Whitford said it was clear that PNC Brokerage was "limited" compared with Hilliard, which has 550 brokers, more sell-side research, access to capital markets, and municipal bond underwriting capability.
The arrangement also met Hilliard's requirement that it retain some measure of independence in a merger. The company is owned by 350 of its 1,200 employees.
"The last thing we wanted to do was become a part of a large organization," said Todd Lowe, senior vice president of branch and marketing administration at Hilliard. "The whole thing would fall apart culturally."
Hilliard was approached by insurance companies, brokerage firms, and other banking companies but chose PNC because there is little overlap between the two, Mr. Lowe said.
Mr. Whitford said Hilliard's heft will lift PNC's brokerage business higher than it could have climbed on its own-in less than five years.
"To be a successful player in this business, you need to have a full range of investment products, the tools for your brokers to be effective, and access to your capital markets," he said. "Hilliard-Lyons has all those three things."
Hilliard oversees $22.5 billion of assets. Of that, $5 billion is managed on a discretionary basis by 22 portfolio managers, including $2 billion in trust. The firm's largest presence is in Kentucky, followed by Indiana, Illinois, Michigan, Ohio, Tennessee, and West Virginia.
PNC said it expects Hilliard to add $22 million to net income, or 2 cents per share, in 2000. PNC Private Bank garnered $398 million in revenues last year, including $224 million from investment management and trust and $61 million from PNC Brokerage. Net income for those lines of business was not available.