61 National City branches must be sold in PNC deal
NEW YORK — As a condition for federal approval of PNC Financial Services Group's purchase of National City, the two companies will have to sell 61 National City branches in Western Pennsylvania.
National City's nearly 30,000 employees, from top managers to bank tellers, were informed during the afternoon of the order from the Department of Justice. The department said in a statement it was requiring the branch sales "to resolve competitive concerns about the companies' pending merger."
The department's order wasn't a surprise; PNC Chairman James Rohr said when the $5.6 billion deal was announced Oct. 24 that the combined bank might be forced to sell branches because of antitrust concerns. The bank becomes the nation's fifth largest by deposits and the fourth biggest in terms of branches.
The Justice Department said the branches to be sold include 50 in the Pittsburgh area, six in Erie county, four in Crawford county and one in Warren county. All told, the branches had approximately $4.1 billion in deposits as of June 30, the government said. No other specific details were available.
The companies were also ordered to sell parts of their lending and related businesses with middle market customers in the Pittsburgh area and Erie area.
It was not immediately known what the impact of the sales might be on employees or account holders. It was also too early to tell who might be potential buyers.
It is fairly common for the government to make branch sales a condition of antitrust approval for a merger between banks that are located close to one another.
"This is an important step in PNC's National City acquisition," said PNC spokesman Fred Solomon. "It might take another 180 days or so to transfer those branches to a new buyer."
Pittsburgh-based PNC is the first U.S. bank to use money obtained under the government's $700 billion bailout program to make an acquisition. National City is based in Cleveland.
Both banks for years have been mentioned for a possible combination. The banks agreed to the deal because their businesses have been hurt by high-risk mortgage loans, and National City has been weighed down by Ohio's struggling economy.
National City lost $5.15 billion during the third quarter, and was in the midst of a three-year program to cut 4,000 jobs before PNC made an offer to acquire the bank. PNC Financial said it will aggressively take write-downs and increase reserves on National City's loan portfolio when the deal closes.
PNC was profitable last quarter despite credit losses. It projects that National City's battered lending portfolio might incur $19.9 billion of lifetime losses.
The combined bank will have about $180 billion in deposits and more than 2,700 branches located mostly in the Mid-Atlantic and Midwest states as well as Florida.
The combined bank also will have the largest deposit bases in Pennsylvania, Ohio and Kentucky.
