Just three days ago National City CEO Peter Raskind told analysts his company was facing it's fifth-straight quarterly loss. But Raskind spoke confidently of a turn around plan, complete with 4000 job cuts, that would keep his bank afloat. Then Friday, Pittsburgh's PNC Financial it was buying National City. PNC will sell $7.7 billion of preferred shares to the US Treasury to help finance the deal. On a conference call, analysts like Deutche Bank's Mike Mayo pressed PNC Chairman and CEO Jim Rohr for details of the Fed's involvement.
Mike Mayo: Was this forced by the government? Was there a competitive bid? Can you give any color on that
James Rohr: There was a competitive bid.
Mike Mayo: ...and can you say if it was forced by the government?
James Rohr: I don’t know if it was forced by the government, you'll have to ask them.
A Treasury Department spokesman wouldn't comment on the deal. Nor would she confirm or deny that National City had applied to sell some of its troubled assets under the so-called TARP program, part of the $700 billion dollar federal bank bailout. But Cleveland's Mayor Frank Jackson said this:
Frank Jackson: As they were having conversations about this $700 billion bailout package that came out of Washington there was some discussion as to who would be eligible for that assistance. I believe if the US Treasury Dept would've been more helpful in that regards to help National City then we would not be here making this announcement.
And that is interesting, says banking analyst Gerard Cassidy with RBC Capital.
Gerard Cassidy: The US government through it's TARP equity program is now choosing the survivors and the ones that may have to sell out. And if its true that this is what happened at Nat City, where they were told they were not going to have access to TARP funding, then if they follow through with similar actions with other banks that are struggling, that will force other banks to sell out as well.
PNC has largely avoided many of the credit problems of its industry peers. Chairman and CEO Jim Rohr says the purchase will expand his company's deposit base. Rohr isn't yet sure what he'll do with National City's asset management side.
James Rohr:They have the fund business, private banking, trust business. And I think all of those are very attractive though how they are going to fit over time...we're going to have to spend more time with the National City people next week and start to figure it out.
Many bank watchers and analysts predict big job cuts at National City, especially among senior staff in Cleveland. Raj Aggarwal is the dean of the business school at the University of Akron. Aggarwal says Cleveland will also take a hit by losing a strong corporate booster.
Raj Aggarwal: It has been a civic supporter of charities and nonprofit activities. So when it's sold and headquarters moved, it means that a lot of our civic life will suffer a little bit.
But Joe Roman, who heads the Greater Cleveland Partnership, says the buyout may not be all bad for the region.
Joe Roman: It's a market that's incredibly ripe for PNC. It's a new market for them. So I think it's a little premature to look at what this might be three to five years from now and without trying to pretend it's not an impact on our region, I think it's a little premature to know where this might be headed.
If National City's shareholders give a thumbs up, the sale could close by the end of the year. Corsair Capital, the New York private equity firm that helped lead a $6 billion capital infusion last spring, will walk out of the deal whole. Corsair negotiated protections for it's $785 million investment. Company headquarters will move to Pittsburgh. National City CEO Peter Raskind will become vice chairman at PNC. Mhari Saito, 90.3.