The National City acquisition by the PNC was an agreement by PNC Financial Services to acquire National City Corp. on October 24, 2008 after an unsustainable loan loss during the subprime mortgage crisis. The deal received much controversy as the PNC used TARP funds to buy National City just hours after receiving funds while National City itself was denied funds, as well as the citizens pride for the city of Cleveland, Ohio, where the National City is based.
Video National City acquisition by PNC
Pre-merge history
The history of the PNC and National City companies dates back to the mid-19th century. National City was established as a City Bank of Cleveland in 1845, while PNC was established in Cleveland's old rival, Pittsburgh, as Pittsburgh Trust and Savings Company in 1852. Both banks later will receive a national charter under the National Banking Act, with National City able to print the US currency until the US Treasury Department assumes operations in the 1920s. Both will have a strong base in their home market, although the PNC will until the 1980s be dwarfed in Pittsburgh by Mellon Bank (now the Bank of New York Mellon) and the Mellon family's immense influence.
Both banks began an interstate expansion in the 1980s, with the two eventually competing in Cincinnati and Louisville by the end of the decade. At the end of 1992, PNC announced plans to acquire Youngstown, Ohio-Ohio Bancorp, the PNC later withdrew from the deal, and National City acquired Ohio Bancorp in 1993, with the same branch and even some Ohio Bancorp employees still working with National City at the time of the deal PNC.
Although the PNC will never enter the Cleveland market itself before the National City deal, National City entered Pittsburgh in late 1995 by acquiring Pittsburgh-based Integra Bank, placing it third in market share behind PNC and Mellon, and finally second after Mellon sold the division retail banking to RBS's Citizens Financial Group in 2001.
In early 2003, there was talk of a potential PNC-National City incorporation on the road, with National City becoming a surviving entity. However, the CEO of PNC & amp; Chairman Jim Rohr, a native of Cleveland who would later organize PNC acquisitions against National City, insisted at the time that the PNC was not for sale.
Maps National City acquisition by PNC
National City Problem
The Fall of the National City began in 2007 when the US housing bubble began to explode, and consumers failed to pay subprime mortgages. Although National City is otherwise healthy on paper, the mortgage business has lowered profits into losses, with CEO Peter Raskind even afraid that the bank might fail. National City then put themselves up for sale in March 2008.
Adding to the bank's problems, The Wall Street Journal reported on June 6, 2008, that National City has signed a memorandum of understanding with federal regulators, effectively putting banks in probation. The terms of the secret agreement, entered into the preceding month with the Office of Currency Financial Supervisors (which regulates nationally hired banks), is unknown.
On June 10, 2008, National City Corp. confirmed that it has reached an agreement with the regulator "on the level of capital, risk management practices and other aspects of its business." The Company stated that there was no material development in these areas because the memorandum of understanding was signed in April and May 2008.
In October 2008, National City was conducting serious sales discussions following Washington Mutual failures and Wachovia's forced sale to Wells Fargo. Among the publicly known front runners are UG Bancorp who is headquartered in Minneapolis, Toronto-based Scotiabank, and the buyer PNC in the end. Scotiabank, which has long been out of the US market unlike its Canadian rivals, is considered the best option for local governments because Scotiabank does not have a pre-existing presence in the United States, which allows most of National City's operations to stay in Cleveland. Although National City and PNC have little overlap, Cleveland's proximity to Pittsburgh means massive dismissal in both cities.
Wells Fargo, Third Fifth Bank, and Crosstown KeyBank's competitors all also expressed interest in National City, with Fifth Third even offering to move its corporate headquarters to Cleveland from all states in Cincinnati if it wants to buy National City. Like US Bancorp, Fifth Third has a redundant trail with National City, while Wells Fargo (even after the acquisition of Wachovia) has virtually no overlap with National City at all. KeyBank and National City have little overlap outside of Ohio, although several branches in Northeast Ohio may require divestment.
Take over by PNC
In early October 2008, PNC had offered a deal with National City, but withdrew. Combined with Scotiabank's decision to once again not enter the US market, National City began initial merger talks with Bancorp AS.
Meanwhile, the US government began spending TARP funds from a $ 700 billion bailout plan to banks to help stabilize their funds and issue more loans. On October 23, 2008, when the board of directors of the National City would decide on a US Bancorp deal, the PNC made an 11-hour offer to buy National City and became its white knight. The next day, after National City was denied TARP funds by the US government, they received a PNC offer of approximately $ 5.2 billion in stock. The acquisition is a share purchase transaction completed before the end of 2008.
The agreement originally made PNC the largest banks in Pennsylvania, Ohio, and Kentucky, as well as the second largest bank in Maryland and Indiana. This greatly expanded PNC presence in the Midwest as well as entered the Florida market. Pittsburgh, Louisville, Kentucky, and Cincinnati are the only three markets prior to the acquisition deal that both banks have a large presence. Overall, the deal makes PNC the fifth largest bank in the United States. After the acquisition, PNC conducted a review of the National City balance of payments and took out the removal and reserves of $ 12.6 billion in the loan portfolio, indicating how severe the problem at National City.
Criticism
While some Clevelander dislike the fact that National City is being taken over by Pittsburgh-based rivals because of the long-running NFL rivalry between the two cities, much of the reaction to the PNC-National City deal involves the fact that TARP funds are used by the PNC to buy National City.
US Representative Dennis Kucinich of Cleveland was unsuccessful in fighting against the merger, arguing that the TARP National City fund application was never seriously considered, the PNC actually took on National City's own TARP funds as well as the effects on the local economy. In addition, National City is the only one of the 25 largest US banks eligible to receive TARP funds for rejected TARP funds, with Omaha, Nebraska-based Lauritzen Corporation (ranked 37th nationally) to be the next largest bank to be rejected. (Banks owned by foreign companies such as Citizens Financial Group, HSBC Bank USA and TD Bank, NA are automatically disqualified from receiving TARP funds.) Many local businesses based in Cleveland also have unsuccessful grassroots moves to save National City.
There is also criticism from shareholders of National City. The deal is described as "take-under," which means the purchase price is below the market value of National City. The shareholders feel that they are rated too low for their National City stock. Eight National City shareholders received a settlement from PNC on July 31, 2009. Under the terms of settlement, investors dropped their claim in exchange for the release of more than 400 pages of documents at Delaware State Court.
Nevertheless, the agreement was approved by shareholders of both banks on December 23, 2008, and finalized on December 31, 2008.
Aftermath
In the case of Pittsburgh, the two banks have significant overlap to the point of causing antitrust issues in Western Pennsylvania because both banks have two of the top market shares in the Pittsburgh area. As a result, the US Department of Justice requires PNC to sell 50 branches of National City in the Pittsburgh area and 11 more branches in and around Erie to competitors. Wells Fargo, KeyBank, and Fifth Third - who have requested to obtain National City as a whole and in the case of Fifth Third having branches in Pittsburgh - are all interested in purchasing a National City branch. JPMorgan Chase, Huntington Bancshares, First Niagara Bank and FNB Corporation are also in discussion for the branches, with Huntington and FNB, such as Fifth Third, having branches in Pittsburgh.
On April 7, 2009, PNC reached an agreement with First Niagara Bank based in Buffalo to purchase 57 branches. First Niagara officially took over the branches on September 8 after signs were changed from the National City during Labor Day Weekend. The branches not purchased by First Niagara are four in Crawford County, Pennsylvania that the PNC must divest; of the four, one branch in Titusville was sold to Emclaire Financial Group while three others (one in Conneaut Lake, two others in Meadville, including a branch inside Wal-Mart) were sold to Marquette Savings Bank. Although the employees in the sold offshore branches are maintained (First Niagara, in fact, established a regional office in Pittsburgh at 11 Stanwix Street near National City's Pittsburgh headquarters at 20 Stanwix Street, adding more work there.), There are still heavy layoffs in National City Headquarters in Cleveland.
Due to significant overlaps in Pittsburgh remaining, PNC closed seven branches of National City & five PNC branches on November 6, 2009, and then closed two other PNC branches on April 23, 2010, with accounts in those branches being transferred to the nearest PNC branch that will remain. As part of an agreement to purchase 57 National City branches from PNC, First Niagara has the right of first refusal to purchase PNC's National City branch. Despite closing branches and other people's sales to First Niagara, PNC still ends with 46% market share in Pittsburgh, more than three and a half times the market share from second place Citizens Financial Group with 13%. In July 2012, PNC's market share in Pittsburgh increased to 48%, more than the remaining ten top banks in Pittsburgh by a combined deposit; further increasing to 50% virtual by October 2013.
Although experts expect more TARP funds to be used by stronger banks to buy weaker competitors, there is no longer a deal that is eventually made involving TARP funds.
Conversion to PNC
The name of the National City, as expected, went well into 2009 as it will require the PNC to integrate the two banks simultaneously. PNC started out of the National City name in favor of PNC on November 7, 2009, starting with Pennsylvania (where the two most overlapping), Florida, and Youngstown & amp; Steubenville, Ohio area. The day also saw the rebranding of National City Mortgage to PNC Mortgage and NatCity Investments fully merged into PNC Investments. In addition, the National City bank charter merged into a PNC, effectively having a legally converted retail banking branch known as PNC Bank, N.A., d/b/a National City Bank .
The National City Conversion to PNC was completed in June 2010, in the following phases:
- February 19, 2010 Central & amp; Southern Ohio (including Cincinnati, Dayton, and the state capital of Columbus), Southeast Indiana, and throughout Kentucky.
- April 12, 2010 Northern Ohio (including the domestic market National City in Cleveland, Akron, Canton, and Toledo) and all of Michigan.
- June 14, 2010 All Indiana and all over Illinois, Missouri, and Wisconsin.
Legacy
Despite being the largest bank in Ohio after acquiring National City, the PNC has since slipped into the second largest state position behind the Fifth Third Bank, and perched on the neck and neck with third place Huntington Bancshares for second place. Most of the losses for PNC came in Cleveland, where many Clevelanders left PNC on April 2010 conversion from National City in the area to other banks, especially KeyBank, which became the largest bank in Cleveland by deposit. While National City was the top bank in Cleveland at the time of the PNC acquisition, the PNC slumped to fourth overall position in the area behind KeyBank, Federal Savings & amp; Loans, and Charter Citizens Financial Group One brand. PNC has, however, been able to regain some losses back, and is currently second in the Cleveland market behind KeyBank. In 2011, PNC opened a museum dedicated to the history of National City at the former National City headquarters in Cleveland. With the 2016 announcement that Huntington will acquire FirstMerit Bank, the PNC will slip to number three in market share in Ohio and particularly Cleveland, with Huntington taking over for Fifth Third as the largest bank in Ohio.
Outside Greater Cleveland, the acquisition of PNC National City has been considered a success by experts. This move allowed the PNC to experience growth in Chicago, and was able to use Florida footprints acquired from National City to expand in the Southern United States. In 2011, PNC expanded its presence in Florida by acquiring branches of BankAtlantic in the Tampa Bay Area, and later acquiring the Atlanta branches of Flagstar Bank and, in major expansions in South, RBC Bank of Royal Bank of Canada. Since the RBC agreement is completed, PNC has been mentioned as a possible buyer of the Financial Region Corporation and/or the SunTrust Bank to increase the Southern presence.
PNC finally paid back its TARP funds in full in February 2010 while the National City conversion was still underway. However, it takes a bank to sell its Global Investment Servicing division to BNY Mellon in order to have the funds to buy back its shares.
First Niagara Bank, which is largely a semi-regional bank in Western New York before it acquires National City branches in the Pittsburgh area where PNC is to be divested, using the National City branch it buys as a base for expansion into other markets, acquires banks in Philadelphia and New England before acquiring a branch of HSBC New USA in New York. In 2015, KeyBank acquired First Niagara, carrying the former National City branch into the fold that it was trying to extract from the PNC.
References
External links
- National City Corporation
- PNC Bank
- The National City/PNC City "Transition" Site
Source of the article : Wikipedia
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