It took some time, but the future of struggling Midwestern bank and mortgage lender National City is now clear. They are being purchased by PNC Financial Services Group, Inc., a Pittsburgh, Pennsylvania-based bank.
PNC Bank, which has been around since the mid-1800s, has agreed to buy National City for $2.23 per share, or roughly $5.2 billion in PNC stock, or 0.0392 shares of PNC stock for every share of National City’s, per a company press release.
Unlike traditional buyouts, the price being paid for the ailing lender is a big discount to Thursday’s closing price, mirroring deals like the Bank of America Countrywide merger and the Chase’s buyout of Bear Stearns.
As part of the deal, PNC plans to issue $7.7 billion in preferred stock to the U.S. Treasury under the TARP Capital Purchase Program in order to keep its Tier 1 capital ratio at acceptable levels.
Merger Creates Fifth Largest U.S. Bank
The synergy of the two companies will create the fifth largest bank in the United States by deposits, with a combined total of $180 billion, and the fourth largest in terms of branches.
When I worked in the biz, I remember National City for their second mortgages, which were often available up to 100% combined loan-to-value (CLTV). This is probably one of the reasons why they are no more.
It’s unclear if National City will suffer anymore mortgage layoffs, considering they just announced 4,000 new job cuts last week.
There had been speculation for months regarding a National City takeover or even an outright collapse, with potential suitors ranging from heavyweights Wells Fargo and Chase to cross-town rivals KeyCorp.
The proposed merger, which should cost roughly $2.3 billion, is expected to close by the end of the year.
Shares of National City were off 50 cents, or 18.18%, to $2.25, while PNC edged up $3.11, or 5.47%, to $59.99 in late morning trading on Wall Street.