PNC Financial signals it is open to bank M&A

Jamie Kelter Davis/Bloomberg

PNC Financial Services in Pittsburgh is open to bank acquisitions.

To be sure, the $560 billion-asset bank's finance chief said Tuesday, the company is not about to make any deal announcements, given a current dearth of potential large sellers. But if more regional banks emerge in the M&A arena, PNC won't be caught off guard, Chief Financial Officer Robert Reilly told investors and analysts at the UBS Financial Services Conference.

"The issue with acquisitions is there are windows that appear through random variables that happen to line up," Reilly said. Banks "are sold; they're not bought. So, in our case, we just have to be ready if and when those windows open."

Currently, he added, "we don't see them as open…Nobody is really selling because they have a constructive outlook similar to ours, and the valuations are a bit high. But those things can change."

Reilly said that, due to a combination of lower interest rates in recent months and deregulation promised by the new Trump administration, bankers are generally upbeat about their growth prospects this year. In that kind of operating environment, banks tend to see themselves as either organic growth engines or would-be buyers.

Those banks considering sales are looking for lofty prices, Reilly added, echoing comments made by PNC Chairman and CEO Bill Demchak during recent calls with analysts.

Still, PNC punctuated the sentiment of several other banks in expressing optimism that friendlier regulators could pave the way for more deals this year, including M&A involving larger sellers.

Don McCree, head of commercial banking at Providence, Rhode Island-based Citizens Financial Group, told American Banker recently that he "would not be surprised" to see sellers with around $100 billion of assets or more.

While McCree did not tip his hat about the plans of the $220 billion-asset Citizens, movement toward larger sellers and more M&A would mark a significant shift from the deal landscape of recent years. The former Biden administration ramped up scrutiny of M&A, and deal activity slowed.

There were 125 bank sales announced last year, mostly involving community banks, S&P Global Market Intelligence data shows. That number exceeded the 98 bank M&A transactions in 2023, though it was still far lower than the 201 deal signings in 2021 — the highest level of this decade — and 2022's 156 deals.

The largest deal announced last year — Winter Haven, Florida-based SouthState Corp.'s acquisition of McKinney, Texas-based Independent Bank Group — involved a seller with about $20 billion of assets.

On regulation broadly in the Biden era, Reilly said "it did take a lot of energy, a lot of time, a lot of management calories to understand the new rules, anticipate the new rules, implement the new rules, prove that you're compliant, even though you were compliant by a mile."

Emphasizing that credit losses are low and capital levels are high across the banking industry, he added, "Maybe we can spend our energy on more constructive things rather than new rules coming over the fence at odd times for us to figure out and then send back and say they don't make sense, which unfortunately has been the case."

Reilly also touted the success of PNC's 2021 purchase of the U.S. arm of Spanish giant Banco Bilbao Vizcaya Argentaria. The acquisition of BBVA USA gave PNC new operations in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas.

PNC is now in the midst of opening branches, hiring bankers and aggressively pushing for greater market share and scale in both those seven states and its legacy growth markets.  

The bank plans to spend about $1.5 billion over five years to open more than 200 branches across a dozen major markets, including Miami, Atlanta, Houston, Denver and Phoenix.

A more business-friendly environment could provide a smoother path for that ongoing project. "We're going into places where we're established, but in a bigger way," Reilly said Tuesday. "We are investing aggressively into the success and the momentum that we're experiencing."