Bank stocks have not lately been the heroes of Wall Street. With the major bank stocks at year-lows and analysts pondering their market values, merger activity for regional banking continues. PNCFinancial Services said Monday that it will buy the American retail banking business of Royal Bank of Canada today for $3.45 billion following news of Capital One’s acquisition of ING’s U.S. online banking arm last week. The companies say the deal is a $112 million discount to the tangible book value of the business, or 97% of the full book value.
The financial services provider said it will gain 424 branches in the American southeast. PNC CEO James E. Rohr called it an “outstanding growth opportunity.” Shares in PNC Financial fell 2.2% after the announcement, however, as investors considered the earnings impact that an already struggling market will lend to the company. RBC’s southeast banking unit currently holds about $25 billion of assets, and would make PNC a player in the largest number of bank branches offered in the U.S.
Rohr continued, “The success of our recent acquisitions demonstrates that when we bring our innovative products and services to new markets we have the proven ability to win clients and take out costs.”
With major bank stocks trading at below book value today, the deal offers some questions about the ability of lending institutions to find earnings value in the near term, with the federal funds interest rate still near zero.Bank of America is trading today at 50% to its book value, Citigroup at 65% and JP Morgan Chase is trading 94% below book value, according to a note from analyst Justin Hoogendoorn at BMO Capital Markets today.
The financial services provider said it will gain 424 branches in the American southeast. PNC CEO James E. Rohr called it an “outstanding growth opportunity.” Shares in PNC Financial fell 2.2% after the announcement, however, as investors considered the earnings impact that an already struggling market will lend to the company. RBC’s southeast banking unit currently holds about $25 billion of assets, and would make PNC a player in the largest number of bank branches offered in the U.S.
With major bank stocks trading at below book value today, the deal offers some questions about the ability of lending institutions to find earnings value in the near term, with the federal funds interest rate still near zero.Bank of America is trading today at 50% to its book value, Citigroup at 65% and JP Morgan Chase is trading 94% below book value, according to a note from analyst Justin Hoogendoorn at BMO Capital Markets today.
