December 22, 2024

DealBook: PNC Is Said to Be Near $3.45 Billion Deal for R.B.C. Unit

6:01 p.m. | Updated The PNC Financial Services Group is near a deal to buy the Royal Bank of Canada’s American consumer banking operations for about $3.45 billion in cash and stock, people briefed on the matter said on Sunday.

The transaction, which would allow R.B.C. to shed a division that has been hobbled by the housing crisis, could be announced as soon as Monday, these people said. They cautioned that final details were still being ironed out and that the deal could still fall apart.

PNC beat out a rival, the BBT Corporation, in a race for the unit, RBC Bank, the people briefed on the matter said.

R.B.C. purchased Centura Banks in 2001 for nearly $2.2 billion, beginning a push into American retail banking. But the unit, renamed RBC Bank after a series of acquisitions, has failed to win significant market share.

RBC Bank was buffeted by the housing crisis, losing money for several consecutive years. It took a $1 billion write-down in 2009, leading to a reorganization that included eliminating jobs and reducing lending.

By contrast, PNC has performed well since the financial crisis. It has reported three consecutive increases in annual profit, earning $3.4 billion in 2010. Its last major deal was buying the National City Corporation in 2009 for about $4 billion.

Through the deal, PNC is hoping to expand into the Southeast, an area in which the bank currently has relatively little presence. RBC Bank currently has more than 420 locations in six Southern states, from Virginia to Florida.

While R.B.C. is pulling back from retail banking in the United States, it still has significant operations in the country, including an investment banking arm.

Other Canadian competitors, however, have made big pushes into American consumer lending over the last year. The BMO Group agreed in December to buy Marshall Ilsley, based in Milwaukee, for $4.1 billion.

That same month, Toronto-Dominion struck a $6.3 billion deal for Chrysler Financial, the former lending arm of the eponymous car maker.

R.B.C. is only the latest bank to sell a major unit under pressure. Last week, the ING Group agreed to sell its American online banking arm to Capital One Financial for $9 billion as part of the requirements of its bailout by the Dutch government.

Shares in R.B.C. rose 1.2 percent, closing at 54.33 Canadian dollars on Friday, after Bloomberg News reported that PNC had won the auction.
Shares of PNC fell 2.8 percent, to $57.79, on Friday.

R.B.C. was advised by JPMorgan Chase, while PNC was advised by Bank of America Merrill Lynch.

Article source: http://feeds.nytimes.com/click.phdo?i=c8cf9dfd0a6e46e61a3782ef22d56c77

Speak Your Mind