PNC to take over BBVA U.S. subsidiary for $11.6 billion

By Pavithra R

BBVA has announced entering into an agreement to sell its subsidiary in the U.S. to PNC for $11.6 bn (€9.7 billion) in cash, an amount that represents 19.7 times the unit’s 2019 earnings, and that is almost 50% of BBVA’s current market capitalization, creating significant value for shareholders.  The transaction is expected to close in mid-2021 once the required regulatory approvals have been obtained.

In the U.S., BBVA is a Sunbelt-based bank with $100 bn in assets and 637 branches, with market shares in Texas, Alabama and Arizona. On closing of the transaction, PNC, based in Pittsburgh, Pennsylvania, will become the country’s fifth-largest bank by assets.

“This is a very positive transaction for all sides. PNC has recognized the great value of our unique client franchise and of our great team in the US, who will be part of a leading financial services group in the country. The deal enhances our already strong financial position. We will have ample flexibility to profitably deploy capital in our markets strengthening our long-term growth profile and supporting economies in the recovery phase, and to increase distributions to shareholders,” said BBVA Group executive chairman Carlos Torres Vila.

The transaction excludes the broker-dealer (BBVA Securities) and the branch in New York, through which BBVA will continue to provide corporate & investment banking services to its large corporate and institutional clients. It also excludes the representative office in San Francisco and the FinTech investment fund Propel Venture Partners. The deal is to have a positive impact on BBVA’s fully loaded CET1 ratio of c.300 basis points, or €8.5 billion of CET1 generation. The sale will generate a capital gain net of taxes of approximately €580 million and BBVA Group’s tangible book value will increase by €1.4 billion.

“Our acquisition will accelerate our growth trajectory and drive long-term shareholder value. This transaction is an opportunity to navigate our future from a position of strength, accelerating PNC’s expansion while drawing on our experience as a disciplined acquirer. We are excited to bring our industry-leading technology and innovative products and services to new markets and clients, leveraging our mutual commitment to building diverse and high performing teams and supporting the communities we serve,” said William S. Demchak, PNC’s chairman, president and chief executive officer.

Founded in 1857, BBVA is a customer-centric global financial services group. The Group has a strong leadership position in the Spanish market, is the largest financial institution in Mexico, it has leading franchises in South America and the Sunbelt Region of the United States.