June 20 (Bloomberg) -- PNC Financial Services Group Inc. has agreed to pay $3.45 billion in cash and stock for Royal Bank of Canada’s U.S. retail banking unit, according to people with knowledge of the matter.
The deal could include as much as $1 billion in PNC stock and may be announced as early as today, said the people, who declined to be identified because the talks are private. PNC also agreed to acquire credit-card assets from RBC for $165 million, the people said. The value of the agreements totals about $3.62 billion.
An acquisition would help Pittsburgh-based PNC expand its retail business in the U.S. Southeast beyond a foothold in Florida. The RBC Bank unit, based in Raleigh, North Carolina, has more than 420 branches in six states across the region. PNC Chief Executive Officer Jim Rohr, 62, told investors June 3 the bank is “disciplined” with acquisitions, preferring purchases that build 10 percent market share in “larger” cities.
“There’s an appetite for acquisitions given their capitalization and the lack of organic loan growth,” Tom Lewandowski, an analyst at Edward Jones & Co. in St. Louis, said in a June 17 interview. “They’re looking to go out there and purchase that loan growth.”
The precise amount of PNC stock that RBC would receive will be determined closer to the date the deal is completed, which is expected by March, the people said.
PNC has retail operations in 15 states and Washington D.C., including more than 2,500 branches, according to the bank’s website. The firm acquired National City Corp. in 2009 for about $3.9 billion in stock.
Royal Bank is seeking to sell RBC Bank a decade after it entered the U.S. with a $2.16 billion takeover of Centura Banks. Royal Bank is retreating from U.S. consumer lending as competitors Toronto-Dominion Bank and Bank of Montreal expand by acquiring troubled U.S. lenders.
RBC Bank has posted 11 consecutive quarterly losses as of March 31, with combined annual losses of about $3.1 billion since 2007, according to Federal Deposit Insurance Corp. filings. RBC Bank is the smallest of Royal Bank’s U.S. operations, which also include wealth management and RBC Capital Markets investment bank.
Fred Solomon, a spokesman for PNC, said the bank doesn’t comment on “rumors or speculation.” Katherine Gay, a spokeswoman for RBC, declined to comment.
Royal Bank rose 64 cents, or 1.2 percent, to C$54.33 on June 17 in Toronto Stock Exchange trading. PNC fell $1.68, or 2.8 percent, to $57.79 that day in New York Stock Exchange composite trading.
JPMorgan Chase & Co. is advising RBC on the transaction, and Bank of America Corp. is advising PNC, the people said.
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