PNC, the Pennsylvania-headquartered bank, has agreed to buy Spanish bank BBVA’s US subsidiary for $11.6 billion (€9.7 billion).
The all-cash deal is nearly 20 times the US subsidiary’s 2019 earnings, equivalent to half of the Spanish bank’s current market capitalisation.
For PNC, the acquisition sees it create America’s fifth-largest bank by assets. The bank jumps ahead of US Bank National Association and Truist Bank – the product of BB&T’s $28 billion acquisition of SunTrust back in February of 2019.
PNC now sits under Citi, Wells Fargo, Bank of America and JPMorgan Chase.
The BBVA US subsidiary has significant market shares in America’s sunbelt, including Texas, Alabama and Arizona. It also holds more than $100 billion in assets and operates 637 branches.
Following the deal, PNC will have more than $550 in assets. It is still some way behind the top four US banks, which each have at least $2 trillion in assets.
Half a year after BlackRock
The sale lands six months after PNC sold its $17 billion stake in BlackRock, the world’s largest asset manager.
The sum paid for BBVA’s US operations almost exactly matches the BlackRock sale after tax.
“We’ve managed to effectively trade the BlackRock ownership stake we had for a franchise that takes us coast to coast,” Bill Demchak, PNC’s chief executive, tells the Financial Times.
“BBVA is in the best markets in the country with substantial presence down in Texas, Arizona, California and in Denver, in Alabama, and down through Florida.
“They have a lot of capital in the USA and invested heavily in technology, but could not bring [their operation] to scale and were in effect under-earning.
“We’re a better owner of the asset — we have lots of synergies and lots of products they don’t have.”
Demchak expects the acquisition will generate around $900 million in cost savings.
BBVA claims the deal holds “hidden value”, citing analyst predictions which came in at €3.8 billion – less than a third of the final figure.
Shares in BBVA surged almost 20% yesterday in early trading following the announcement of the deal.
The deal is expected to close in mid-2021 and is still subject to regulatory approvals have been obtained. The Spanish bank intends to use the funds raised in a share buyback when the transaction closes.
“We have been pretty smart at capitalising on a very rare, unique opportunity of having a strategic purchaser with cash in hand,” Onur Genc, a BBVA chief executive, tells the FT.
PNC’s acquisition does not include BBVA Securities or the bank’s branch in New York which banks BBVA’s large corporate clients.
It also excludes the representative office in San Francisco and the fintech investment fund Propel Venture Partners.