The government told PNC Financial Services Group to sell 50 National City Bank branches in Allegheny County as one block to one buyer, a move that could introduce a big new competitor to Pittsburgh, industry sources said Tuesday.
The federal mandate is part of the Justice Department's order on Thursday that PNC divest 61 branches throughout Western Pennsylvania before it may acquire National City Corp.
"All of the Pittsburgh divestitures have to go together. All of the (50) branches must go to the same buyer," said PNC spokesman Fred Solomon, confirming details of the order.
The 50 National City branches represent $3.35 billion in deposits in Allegheny County. The other 11 branches represent $750 million in deposits.
Analysts said a 50-branch bunch would cost somewhere between $160 million and $335 million -- too rich for a smaller bank to handle, but not for other, bigger banks outside this region.
Candidates include M&T Bank of Buffalo and Fifth Third Bank of Cincinnati, said Bob Wagner, senior vice president at Ferris Baker Watts' office in Mt. Lebanon.
M&T operates more than 700 branches in seven states, including 227 branches in Pennsylvania, plus Washington, D.C., and has more than $65 billion in assets. Spokesman Kent Wissinger said the bank would not comment on industry speculation.
Fifth Third already has a dozen branches in Allegheny County and "intends to continue to build out our presence in Western Pennsylvania," said James "Jay" Ferguson III, Western Pennsylvania president. But he declined to say whether Fifth Third, which has nearly 1,300 branches and $116 billion in assets, would want to buy all 50 branches.
Other candidates might include investment banks Morgan Stanley and Goldman Sachs, which recently created holding companies that could accommodate commercial banking franchises, said Wagner.
"I don't think you'll see any of the super-community banks in our region swallowing 50 branches at once," said Wagner.
"It appears the Justice Department is trying to bring another good-sized bank into the region. It would have to be a fairly big bank to buy that many branches," said Robert McCarthy Jr., CEO of Parkvale Financial Corp., which has less than $1.9 billion in assets.
The government required PNC to spin off branches to "resolve competitive concerns raised in the proposed merger," the agency said in a statement without elaborating.
"We understand (the mandate) but are disappointed by it," said McCarthy. Parkvale would otherwise be interested in buying some of the National City branches, he said.
PNC received approval from the Federal Reserve on Monday to acquire Cleveland-based National City in a $5.6 billion deal announced Oct. 24. The only remaining step is for each bank's shareholders to approve the deal in votes scheduled for Tuesday.
The merger will make PNC the nation's eighth-largest bank by assets ($288.5 billion), fourth-largest by branches (2,747) and fifth-largest by deposits ($180 billion).
A single buyer could purchase the remaining 11 branches in Erie, Meadville, Titusville and Warren, said Solomon. PNC expects to strike sales agreements, or even one deal for all 61 branches, around the time the National City acquisition is completed around Dec. 31, he said.
It was not clear yesterday what would happen if PNC were not able to sell the 50 Allegheny County branches in one transaction, said Solomon. The Justice Department could not be reached for further comment.
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