Predictions of Another PNC Megadeal Are Overblown

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Investor worries that PNC Financial Services Group Inc. has another big bank acquisition in the offing are overblown, according to an analyst.

Based on recent meetings with top PNC management, including Chairman and Chief Executive Office James Rohr, Stifel Nicolaus analyst Christopher Mutascio said the Pittsburgh company has no interest in acquiring a large regional bank such as Regions Financial Corp. or SunTrust Banks Inc. Rather, Rohr said deals like the one announced last week to buy 27 branches in metropolitan Atlanta from Flagstar Bancorp Inc. for $42 million are the "more typical type of fill-in transaction to augment its RBC acquisition," Mutascio wrote in a research report published on Monday.

"Rohr was clear to state that he has no interest in Regions Financial or SunTrust and that a large regional bank acquisition is not on the radar screen," Mutascio wrote.

Concerns that more big deals like the planned $3.45 billion acquisition Royal Bank of Canada's U.S. operations have been rampant since PNC announced the planned transaction in June.

Mutascio also wrote that PNC thinks it is less likely it will have to issue $1 billion in stock to help finance the deal, which could dilute the earnings benefits of the transaction.

"While the company can't say for sure whether or not it will have to issue $1 billion in stock to RBC, as it has to wait for regulatory approval of the deal, management sees no reason based on their estimates of Tier 1 common capital why it would need to do so," Mutascio wrote.

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