PNC Will Be Regional No More

PNC Financial Services ’ acquisition of the BBVA franchise in the U.S. would make its “regional bank” nametag increasingly obsolete. The question is whether that also transforms its profitability. The $11.6-billion deal agreement flows from PNC’s sale of its stake in BlackRock earlier this year, which pulled in $11.1 billion […]

PNC Financial Services ’ acquisition of the BBVA franchise in the U.S. would make its “regional bank” nametag increasingly obsolete. The question is whether that also transforms its profitability.

The $11.6-billion deal agreement flows from PNC’s sale of its stake in BlackRock earlier this year, which pulled in $11.1 billion after tax. By paying all cash, PNC is in effect swapping out the BlackRock stake, which generated good returns but didn’t add much strategically, for a major expansion of its core business footprint.

Some investors may have been dreaming that a bank with $10 billion to play with could radically rethink the whole concept of banking, perhaps with a huge bet on tech. But many big banks are still finding that core relationship banking and branches, even in a scaled-back form, remain part of the playbook to grow truly profitable customers. That may be particularly so in commercial banking, where PNC will be tilted after the deal.

Instead, investors should think about what PNC is aiming to redefine, which is the “regional bank” appellation. By adding BBVA in places like Texas, the Sun Belt and California to PNC’s eastern center of gravity, postdeal the bank would be in 29 of the top 30 U.S. metropolitan statistical areas, up from 22.

So even if it is a different kind of bank, far more “Main Street” than “Wall Street,” it is more national in footprint than Citigroup , for example, along some dimensions. It may also be more national than some peers in asset size among “regionals,” such as U.S. Bank or Truist that have regional branch gaps on the East Coast or West Coast, respectively.

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