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Spanish Lender BBVA's US Banking Unit To Be Bought By PNC For $11.6 Billion

Spanish Lender BBVA's US Banking Unit To Be Bought By PNC For $11.6 Billion
The US business of Spanish lender BBVA will be acquired by PNC Financial Services Group Inc in a deal worth $11.6 billion in cash which would help the company to further strengthen its position in the United States market, PNC said on Monday.
Since the 2008 financial crisis, this will be the second-largest US banking deal and the deal would create a US bank that will have about $560 billion of assets and a presence in two dozen states of the country
This deal reflects the emboldening of regional lenders to pursue scale through deal making because of the relaxation of financial regulations and lowering of corporate taxes under President Donald Trump. This reorganization in the financial industry is taking place as smaller lenders try to compete with the bigger lenders of the market including JPMorgan Chase & Co and Wells Fargo & Co.
The two banks have been holding negotiations about the deal for the last few weeks and they decided to go ahead with the negotiations after the results of the November 3 presidential elections in the United States as the two banks believed that the regulatory environment will not change to any significant degree by the win of Democrat Joe Biden and since the Republicans are likely to control the US Senate, claimed reports about the deal quoting sources.
PNC expects an addition to earnings of 22 per cent by 2022 because of the deal which has been approved by the boards of both companies, the bank said.
About six months ago, its 22.4 per cent stake in mutual fund giant BlackRock Inc for $14.2 billion was sold off by PNC. After-tax gain of $4.3 billion was booked by PNC from that deal and the money will be used by the lender to fund the deal with BBVA which will help the company to expand into the southwest of the United States, said reports quoting sources.
This deal also is a divestment of $9.6 billion acquisition of Compass Bancshares Inc by in 2007. Compass Bancshares was transformed into a US subsidiary of BBVA later on. Following its poor performance weighed on its stock, BBVA decided to retreat from the US market, claimed reports.
A part of its businesses in the United States such as its brokerage would be retained by it, BBVA said, and would also retain its stake in Propel Venture Partners. The bank also said that it would be continue to handle some of its wholesale banking operations from its New York office.
Since the 2008 financial crisis, there have has been a significant drop in deal activity in the US banking sector because of imposition of stricter rules on banks that have more than $50 billion in assets as well as due to regulators barring banks with compliance issues from expanding.
However the capital that banks could use to fund deals was freed up because of lowering of corporate taxes and of tax laws by the Trump administration. Approval of more regional bank mergers are now being given by regulators like Cadence Bancorp's combination with State Bank Financial Corporation and Synovus Financial Corp's acquisition of FCB Financial Holdings.

Christopher J. Mitchell

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