National City acquisition by PNC brings new era in banking
Business First of Louisville - by Terry Boyd Staff Writer
This year might turn out to be the most pivotal in local banking history.
It’s not the first time a dominant name on the local banking scene will disappear.
But it’s the first time in memory that the largest bank in the market will be acquired by a large market rival, creating a huge infrastructure redundancy.
PNC Financial Services Group’s $5.2 billion proposed acquisition of National City Corp. likely will completely change the local financial dynamic in terms of downtown office space, overlapping branches, retail business and commercial loan portfolios, according to those in the industry.
The deal, which is scheduled to close by the end of the year, was brokered, structured and financed by the U.S. Office of the Comptroller of the Currency.
Most of the questions surrounding the acquisition, such as what will happen to a combined work force of about 1,500 employees and to the banks’ 113 branches, combined, in the Louisville market, will take months or even years to work out.
In media reports, James Rohr, PNC’s CEO, has stated that the overlap is expected to affect 2 percent to 4 percent of branches nationwide.
Not a done deal
At this point, the acquisition plans are at the holding company level and the banks themselves have not merged. The acquisition still needs the approval of regulators and shareholders, which seems likely, considering the extent of the federal government’s involvement.
Craig Grant, PNC regional president based in Louisville, said the time frame for National City being integrated into PNC is 23 months. He said Tom Whitford, chief administrative officer at the company’s Pittsburgh headquarters, will oversee the integration.
The holding company merger is pending, said Deborah Lagomarsino, a Federal Reserve System spokeswoman. Because it is pending, agency officials will not discuss it, Lagomarsino said.
Before PNC and National City officials can combine the two banking operations, they must apply to the Federal Reserve System, which, along with other federal agencies, supervises the U.S. banking system.
Chuck Denny, Kentucky/Tennessee president for Cleveland-based National City, was not available for comment.
PNC market share to increase dramatically
National City’s Kentucky and Tennessee operations are sound, banking executives said, and the company’s overall problems were related to mortgage defaults in hard-hit states such as Florida and California.
In executive suites at banks big and small across the city, competitors are following the developments and considering the opportunities arising from the consolidation of two of the market’s largest banks.
Grant acknowledged that competitors might see opportunities and said PNC will work to keep both customers and employees.
“The general perception I’ve gotten is that it’s a very good match, with (the banks) having similar cultures. I think people are generally excited.” And, he said, “we’ll be calling on (competitors’) customers as well.”
Acquiring National City would give PNC about a 30 percent market share in the Louisville market, according to the most current FDIC market share report, which was calculated on assets and deposits as of June 30.
The deal would give PNC more than double the 13 percent market share held by New York-based JPMorgan Chase NA.
On June 30, National City had the largest market share in the Louisville MSA by deposits, with about 19 percent, followed by Chase bank, with nearly 13 percent, and PNC, with 10 percent.
PNC might have to divest assets
PNC and National City’s deposits in the market, combined, would total about $6 billion, said John C. Reed, president of David A. Noyce & Company Investment Banking Group, a mergers-and-acquisitions firm based in Indianapolis.
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