"Regional bank National City Corp is in talks with a number of banks about a possible sale, the Wall Street Journal said, citing people familiar with the situation.
PNC Financial Services Group Inc and Toronto-based Bank of Nova Scotia are among the potential bidders, the paper added.
National City and PNC declined to comment on Wednesday, and Bank of Nova Scotia couldn’t be reached, the paper added.
PNC Financial to Buy National City for $5.2 Billion (Update2)
By Linda Shen
Oct. 24 (Bloomberg) -- PNC Financial Services Group Inc., Pennsylvania's largest bank, plans to buy National City Corp. for about $5.2 billion in stock with funds from the U.S. Treasury.
PNC will pay $2.23 a share, 19 percent less than National City's closing price yesterday, to create the fifth-largest U.S. bank by deposits, the Pittsburgh-based lender said today in a statement. The $7.7 billion of Treasury funding has helped ``put this transaction on a very solid footing,'' PNC said.
National City, Ohio's largest bank, joins Washington Mutual Inc. and Wachovia Corp. in agreeing to a takeover after losses tied to failed home loans. National City, based in Cleveland, declined 83 percent in New York Stock Exchange composite trading this year through yesterday and has posted more than $2 billion in losses during the past two quarters.
``It certainly beats having these troubled banks end up being taken over by the government,'' said David Havens, a credit desk analyst at UBS AG in Stamford, Connecticut. ``It's better for just about everybody that you have a private-market solution and the government facilitating to make sure it happens.''
PNC expects merger-related costs of $2.3 billion and said the deal would add to earnings in the second year. Cumulative impairments from loans in National City's portfolio will be about $20 billion, PNC said in a presentation on its Web site. The combined bank will cut $1.2 billion in costs.
Federal Help
National City Chief Executive Officer Peter Raskind will become a vice chairman at PNC. The deal is expected to be completed by the end of this year. PNC shares dropped 13 percent this year through yesterday.
Neel Kashkari, the Treasury official running the federal rescue program on an interim basis, told lawmakers yesterday that the department supported lenders using funds from the $700 billion bailout law for mergers.
``We have to be very careful about not discouraging prudent acquisitions because that can actually help us get through this troubled times that we're in right now,'' Kashkari said at a Senate Banking Committee hearing in Washington.
PNC advanced 42 cents to $57.30 at 9:41 a.m. NCC slipped 65 cents to $2.10.
Corsair Capital LLC, which owns approximately 7.8 percent of outstanding National City common shares after leading investors in injecting $7 billion earlier this year, will support the deal, PNC's statement said.
PNC was assisted by Citigroup Inc., JPMorgan Chase & Co. and Sandler O'Neill & Partners. Wachtell, Lipton Rosen & Katz gave legal advice.
Goldman Sachs Group Inc. was National City's banker and Sullivan and Cromwell its legal adviser.
PNC will hold a conference call with investors and analysts at 10 a.m. New York time. To listen call 800-990-2718.
To contact the reporter on this story: Linda Shen in New York at Lshen21@bloomberg.net
I thought the BAILOUT money was supposed to be used to make LOANS to Small business and Consumers.
It appears that in this case --- it's being used to ACQUIRE an ailing bank.
Did we really loan these banks this money to increase their market share...or am I looking at it in the wrong way?
Without telling us, this plan was all about consolidation of the banks.
It was either going to be the banks collapse, and someone buys the pieces and the FDIC TAKES THE HIT, or banks consolidate under the house of TARP, and the TAXPAYERS TAKE THE HIT. Either way we are going to pay, but which one looks prettier?
_________________ In politics we presume that everyone who knows how to get votes knows how to administer a city or a state. When we are ill… we do not ask for the handsomest physician, or the most eloquent one.
I agree completely. The bailout was intended for big banks to do the FDIC's dirty work and consolidate all the troubled banks rather then being seized. I guess in the eyes of the Govt, being sold tends to look much better then being seized by the FDIC to the American People.
The Fed said that larger banks were to use their existing capital to acquire smaller ailing banks. It seems now that the merger/acquisition phase will need to play out before LOANS to Small business and Consumers occur. Hope we all can hang on while the suits in their towers figure out what company has synergy or non-overlap business models…be nice to fund a loan right now…
Banks Hoard Money Meant to Boost Economy, Lender Says
Oct. 23 (Bloomberg) -- Banks getting $125 billion from U.S. taxpayers to unlock the credit crunch are saying they'd rather hoard the money than use it for loans, the head of the largest independent mortgage company said.
Quote:
Treasury Secretary Henry Paulson is injecting capital into institutions including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. on the expectation they would step up lending and investing to prevent the economic slowdown from getting worse. That isn't happening, said Lee Farkas, chairman of Ocala, Florida-based Taylor, Bean & Whitaker Mortgage Corp.
Many large banks have told Farkas the U.S. rescue isn't boosting their interest in offering or expanding credit lines to lenders such as his, even for borrowing secured by ``low-risk, highly liquid loans,'' he said.
``By their own admission, they're taking the money and they don't want to put it to work,'' he said in an interview during the Mortgage Bankers Association's conference in San Francisco. ``Every single one you talk to, from the biggest to medium biggest, is saying the same thing, they want to de-lever.''
Interesting article!
So...if you beef up your bottom lines and not loan out the money...then I guess you will get to keep your BIG BONUS for 2008????
I agree completely. The bailout was intended for big banks to do the FDIC's dirty work and consolidate all the troubled banks rather then being seized. I guess in the eyes of the Govt, being sold tends to look much better then being seized by the FDIC to the American People.
Exactly. And as an added bonus, we get a new set of companies that are "to big to fail".
_________________ In politics we presume that everyone who knows how to get votes knows how to administer a city or a state. When we are ill… we do not ask for the handsomest physician, or the most eloquent one.
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