PNC Financial Services Group, Inc. has committed to buying the U.S. banks and credit card assets of Royal Bank of Canada, which will allow PNC to enter markets throughout the southeastern U.S. The deal is worth roughly $3.5 billion and will result in a loss of $1.6 billion for RBC this quarter, according to the bank's projections.
The New York Times DealBook puts the total value of this acquisition at $3.45 billion, while the San Francisco Chronicle values it at $3.62 billion. In addition to purchasing 424 bank branches in Alabama, Georgia, Florida, North Carolina, South Carolina and Virginia, PNC is buying $165 million in RBC's U.S. credit card assets, including personal and business credit cards. PNC expects to spend $322 million on the total costs of the merger, according to the Chronicle.
Although it will not affect daily banking or credit card holders in the immediate future, this takeover could mean eventual changes in terms or fees for American RBC clients.
RBC originally acquired these banks and assets in 2001 through the takeover of Centura Banks. According to the New York Times, that deal cost RBC $2.2 billion, and fared poorly in terms of market share in the past decade. Other Canadian banks, including the BMO Financial Group (Bank of Montreal) and Toronto-based TD Bank Financial Group, have continued to pursue acquisitions in the U.S., but RBC is the first to sell its U.S. assets back to American banks.
This acquisition will move Pittsburgh-based PNC from the sixth largest U.S. bank to the fifth, and is a deal that speaks to the recovering economy. According to Dick Bove, banking analyst with Rochdale Securities, as recently as six months ago a deal of this size would not have happened because the capital wasn't available, not even to the biggest banks. The economic recovery has again made larger mergers and acquisitions possible, and may fuel further deals of this nature in the near future.