Investor Alert

Nov. 15, 2020, 8:17 p.m. EST

PNC in talks to buy U.S. unit of Spain's BBVA

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By Cara Lombardo

PNC Financial Services Group Inc. is in talks to buy the U.S. arm of Spanish lender BBVA, according to people familiar with the matter, in what would be one of the largest bank tie-ups since the financial crisis.

A deal, which would likely be valued at more than $10 billion, would create the nation's fifth largest retail bank, with more than $550 billion of assets and branches up and down the eastern half of the country. BBVA, which in 2007 bought Alabama-based Compass Bancshares, has more than 600 branches and about $100 billion of assets in the U.S.

The companies are discussing a combination that could be announced by Monday, the people said, provided talks don't fall apart at the last minute.

PNC, which has a market value of just over $50 billion, added to its acquisition war chest earlier this year when it sold its stake in BlackRock Inc. for $15 billion. BBVA's U.S. unit isn't publicly traded.

Buying BBVA USA would help Pittsburgh-based PNC expand both its consumer- and commercial-banking businesses. Closing branches in regions like the southeastern U.S., where the two networks overlap, could create opportunities to cut costs.

PNC Chief Executive William Demchak said in September that extending the bank's national presence would be the "first, second and third objective" of any deal.

Big bank takeovers have been rare since the 2008 crisis, with few major players willing to test the political waters and wary of new regulations now applied to larger banks. What is more, the old logic of adding adjacent branch networks is less powerful now as more banking moves online and consumers are less tethered to their corner branch.

But regional lenders have been under pressure as big national banks such as JPMorgan Chase & Co. and Bank of America Corp. rake in deposits by attracting customers with flashy apps and ubiquitous branch networks. Low interest rates have weighed on bank profits, especially those of regional players that rely more on traditional lending than their larger competitors.

In October, First Citizens BancShares Inc. agreed to buy CIT Group Inc. for $2.2 billion, creating a regional bank with more than $100 billion in assets. BB&T Corp. and SunTrust Banks Inc. merged last year into Truist Financial Corp., which is the eighth-largest U.S. lender, but would be kicked down a notch by a combined PNC-BBVA.

And the sheer number of midsize regional banks in the U.S. -- there are at least 30 with between $50 billion and $250 billion of assets -- has for years stoked expectations of additional consolidation.

A deal would signal a retreat from the U.S. for BBVA, formally called Banco Bilbao Vizcaya Argentaria, Spain's second-largest lender with a major presence in Latin America too. It paid about $10 billion in 2007 to acquire Compass, which gave it a long-desired foothold in the U.S., but BBVA has at least twice written down the value of the business and earlier this year warned of another charge as the coronavirus pandemic tore through the U.S. economy.

The bank, known within the industry for its deep digital investments, has continued to expand its presence in growing U.S. markets this year, including Texas.

Write to Cara Lombardo at cara.lombardo@wsj.com and Liz Hoffman at liz.hoffman@wsj.com

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