It was no secret that PNC Financial (PNC) intended to put its large excess capital position to work through whole bank M&A, and it was likewise no secret that BBVA (BBVA) management was willing to listen to offers for its U.S. subsidiary. Those two realities intersected on Monday with the announcement that the companies had reached an agreement whereby PNC will acquire the U.S. branch banking assets of BBVA (BBVA USA) in an $11.6 billion deal that should close at some point in 2021.
I do believe this is a win-win opportunity for both banks, though moreso for PNC. BBVA is getting a good price on an asset that it frankly wasn’t running to its full potential, and management can deploy that capital toward dividends/buybacks or its own M&A activities. For PNC, the deal makes it a truly national bank with strong footholds in markets like Houston and Denver, as well as growth opportunities in states like Arizona and California, and likewise provides some meaningful self-improvement opportunities that past deals suggest management will achieve.
I liked PNC before, and I still like it now. I thought BBVA was undervalued when I last wrote about the company, and while the BBVA USA sale is a good value-creation opportunity, core underlying performance has been less impressive.
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