PNC buying BBVA USA for $11.6 billion

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PNC Financial Services Group has agreed to buy BBVA USA Bancshares for $11.6 billion in cash.

The deal, announced early Monday and expected to close in mid-2021, would rank among the biggest bank combinations since the financial crisis of 2008, creating a coast-to-coast franchise with about $563 billion of assets and branch presence in 29 of the nation’s 30 largest markets.

The $104 billion-asset BBVA USA, based in Houston, is a unit of Spain’s Banco Bilbao Vizcaya Argentaria. It was formerly known as Compass Bancshares, which the Spanish banking giant acquired in 2007 and rebranded first as BBVA Compass and later BBVA USA. BBVA USA has $86 billion of deposits and $66 billion of loans.

For PNC, the deal would be its first bank acquisition since it bought Royal Bank of Canada’s U.S. operations in March 2012 for $3.5 billion. That deal added 424 branches, $19 billion of deposits and $16 billion of loans.

The $462 billion-asset PNC had been rumored to be eyeing a big acquisition since it divested its 22.4% stake in the asset manager BlackRock earlier this year.

The deal “will accelerate our growth strategy and drive long-term shareholder value through the strategic deployment of the proceeds from the sale of our BlackRock investment," PNC Chairman and CEO William Demchak said a press release.

Pittsburgh-based PNC has been on an expansion spree of late, opening branches in new markets such as Boston and Nashville, and the deal would speed up its national expansion strategy, Demchak said.

The sale, expected to close in mid-2021, would make PNC the nation's fifth-largest retail bank, vaulting it over the $499 billion-asset Truist Financial — created through last year's merger of BB&T and SunTrust Banks — and the $541 billion-asset U.S. Bancorp.

Unlike the BB&T-SunTrust merger, the PNC-BBVA combination would have little geographic overlap. More than half of BBVA's 637 U.S. branches are in Texas, where PNC has a minimal retail footprint. BBVA also operates in Alabama, Arizona, California, Colorado, Florida and New Mexico, most of which are markets where PNC has little to no branch presence.

PNC expects the deal to be about 21% accretive to earnings in 2022 and said it would “substantially replace the net income benefit” of its passive investment in BlackRock. The deal priced BBVA USA at 134% of its tangible book value.

PNC said it will incur $980 million of merger-related expenses, including $250 million in write-offs of capitalized items. The company plans to cut about $900 million, or 35%, of BBVA USA's annual noninterest expenses.

PNC is not acquiring BBVA Securities, Propel Venture Partners Fund I LP or BBVA Processing Services.

Bank of America; Citigroup; Evercore; PNC Financial Institution Advisory and Wachtell, Lipton, Rosen & Katz advised PNC. J.P. Morgan Securities and Sullivan & Cromwell advised BBVA.

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M&A Growth strategies PNC Financial Services Group BBVA William Demchak