Treasury Uses TARP for PNC to Acquire National City

Pittsburgh based regional bank PNC (PNC) announced Friday morning it is acquiring Cleveland based regional National City Bank (NCC) for $5.5 billion. For each share of NatCity common stock, NatCity shareholders will receive 0.0392 per share (about $2.23 a share) of PNC common stock. The merger will make PNC the fifth largest bank by deposits, with a $180 billion core deposit base.

PNC is selling $7.7 billion equity to the Treasury as part of the TARP that has allocated injecting $125 billion of government money into the nation’s largest banks. PNC’s acquisition of

NatCity confirms the true purpose of the TARP is to use taxpayers’ money for bank consolidation, not for consumer and small business lending.

Treasury promoted bank mergers create less competition for consumer deposits along with higher fees, creating even more economic pain for consumers.

Disclosure: none

Comments

[mik123:]

I haven't seen any of the TARP money go to a bank that really needs it. As a taxpayer I would be furious if this money goes to banks that don't need it. Why is Goldman Sachs getting 10 billion of the rescue money when they have nothing to rescue. They have no bank deposits or problem loans this rescue plan was designed to help. I hope it's not because Treasury secretary Paulson was their former chairman. Morgan Stanley is identical to Goldman and is getting 10 billion. Wells Fargo certainly didn't need the money acquiring Wachovia and their chairman Kovacevich was furious with Paulson for forcing them to take it. The Feds plans on injecting 250 billion into banks that don't need the money with the exception of Citigroup. If they would not give it to National City, that's a huge injustice since there giving 25 billion to Citigroup which has many times the amount of loses and only double the U S deposits. Wells Fargo, J P Morgan,and Bankamerica did not in the past and still don't need Fed money. After National City, I can't find one large bank that's projected to have a loss next year based on all analysts expectations. After the top 25 banks,their size drops dramatically with less than 25 billion in deposits. Go to Smartmoney.com and plug in the ticker symbols and go to earnings projections. Even Citigroup is projected to earn 7-8 billion next year. Fifth Third and Keycorp are expected to have excellent earnings next year according to the analysts who follow the company(find this in Smartmoney.com) The only banks that I see that could use the help today to get them over the hump is Citigroup and National City. The Fed only needs to use 35 billion (25 to Citigroup and 10 to National City). By all analysts estimates, National City would lose $.34 per share next year which equates to apx 700 million. That's not that bad. People forget they earned 350 million for the period ending 6/07. They could very easily get back to earning $1.28 a share in 2010 which would take the stock to a minimum of $12.80 a share assuming a conservative P E of 10. PNC is getting National City at no cost and is actually making 2 billion because of the 7 billion tax benefit on Nat Citys well publicized 19 billion problem loans. From what I read, 25% of this has been reserved for. My biggest question is why did the Government have this 700 billion rescue plan and not immediately give 25 billion to Citigroup and 10 billion to National City. Out of all banks with 25 billion or more of deposits, which by the way is the top 35 banks in the U S , only 2 or 3 really needed the money. If they refused to rescue National City, then as a taxpayer I would demand they cancel the 700 billion rescue plan. All this is doing is making the shareholders of the selected companys rich. Wells Fargo is almost unchanged for October while the Dow is off 35% because of the sweatheart deal with Wachovia. In case you missed that deal, Wachovia agreed to a bid by Citigroup of $1 a share earlier this month. Three days later Wells came out of nowhere and offered $7 a share which was accepted. In another deal Bear Stearns agreed to a $2 a share bid by J P Morgan until shareholders objected and the bid was upped to $10. The National City deal is the first deal since the government announced capital injections to banks, the ability to writeoff bad loans upfront instead of spreading over many years, and relaxed accounting rules regarding asset values on balance sheets. These are all big game changers in National Citys favor of staying independent. At $2 a share and with all the government rescue plans, theres a 0% chance of failure. If they did after all of these plans, the government would look like a bunch of dummies and should all be fired. If the Fed is so interested in making loans, let people go direct with them. Starting this year , most student loans are direct with the Federal Government. This week corporations can start doing the same in the short term loans. Do the same with consumers but pay the banks to process the paperwork. They Feds don't have the manpower for consumers. So don't pass out a 250 gift if your not going to help the banks that need it. All the weak banks with the exception of 2-3 have already merged before any the rescue plans were approved.

2008 Oct 26 09:44 AM

[Jimmy Lathrop:]

The banks all received money because had only the problem children received it, you, me and everyone else would have known exactly who was in trouble, and we would have shorted the bank into oblivion, wasting the taxpayers dollars and eroding shareholder value. That is the way the system works. It is not perfect. A bank doesn't need to use the money if it doesn't need it, but Kovacevich was probably just upset someone was telling him what to do instead of him barking orders at someone, which is what he prefers.

2008 Oct 26 10:37 AM

[EconCents:]

<b>The only article that I have read recently that really lays out what the US Treasury should be doing right now, and over the next few years, is the recent article by Steve Forbes. Anyone in the know should read this:<p>

”How Capitalism Will Save Us” - By Steve Forbes</b>

2008 Oct 26 07:11 PM

[EconCents:]

I didn't do that link right. Go here to read the article:
www.forbes.com/hcome/f...

2008 Oct 26 07:12 PM

[Roy:]

Another blossoming monopoly is born via TARP.

Thank you to our elected officials and upper class who have lined their pockets again with taxpayer money.

On Oct 26 07:12 PM EconCents wrote:

> I didn't do that link right. Go here to read the article:
> www.forbes.com/hcome/f...

2008 Nov 04 01:28 PM