PNC to boost local banking market 

Business First of Columbus - by Adrian Burns
 
PNC and National City combined have more than 2,700 bank branches, with overlap in western Pennsylvania and the Cincinnati and Louisville, Ky., areas. The majority of PNC’s branches are along the East Coast, while most of National City’s locations are in the Midwest.
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PNC Financial Services Group Inc. is likely to be an able-bodied lender for area businesses, a fair competitor to other banks, and an innovative alterative for retail customers, according to several people who have watched the bank operate through the years.

The Pittsburgh-based bank is entering the Central Ohio market through its $5.6 billion acquisition of the region’s fourth-largest bank, Cleveland’s National City Corp. The deal is expected to close by the end of the year, pending regulatory and shareholder approval.

PNC is widely known for a disciplined and focused approach to banking, an ethos that has kept it relatively strong during the meltdown in the financial services industry. The bank sold its home mortgage business to Washington Mutual Inc. in 2001, getting out of the business before it reached its peak bubble. National City mainly got itself into trouble through its involvement in subprime lending, a business it has since dismantled.

“PNC is a conservative, button down, very traditional type of lender,” said Brian Koble, senior research analyst at the Pittsburgh wealth-management firm Hefren-Tillotson Inc. “They are more of the tortoise than the hare.”

The bank’s approach has helped it remain well equipped to fill the hole left by an ailing National City in Columbus and other markets, said Mike Van Buskirk, president of the Ohio Bankers League trade group.

“National City had the problem of not being positioned to do what Ohio really needs right now, and that’s the ability to aggressively make loans in areas where they could help create jobs,” he said. “If a business’ credit is worthy, then PNC will be in a position to give them whatever they need. And that has not been true of National City.”

National City posted a loss of $2.7 billion for the first nine months of 2008. PNC, meanwhile, had a $1.13 billion profit in the same period.

Complementing each other
The key for PNC in Central Ohio and other new markets will be how well it integrates its culture and product offerings with National City, a bank roughly the same size. Despite vast differences in their financial health, the core of National City should lock in well with PNC, Koble said.

“Fortunately, I think in large part the culture of the banks aren’t altogether different,” he said. “The way National City conducts its retail branching and commercial lending business, its core business, has been very steady.”

National City’s customers aren’t likely to see disruptions when PNC takes over, Van Buskirk said.

“I don’t think that the average Columbus customer of National City is going to see much difference,” he said. “You’ll be dealing in pretty much the same people, and eventually the name on the checks will change.”

PNC spokesman Fred Solomon said it’s too early to know what steps the bank might take in Central Ohio, but CEO Jim Rohr mentioned the city as a bright spot in National City’s footprint during an analyst conference call announcing the acquisition Oct. 24.

PNC will bring a large portfolio of fee-generating services to National City customers, adding to the Cleveland bank’s already extensive offerings, Van Buskirk said. PNC offers investment and wealth management, insurance and a large corporate services unit with offices in the U.S. and abroad offering investment banking, treasury management and merger and acquisition consulting. The bank also owns one third of BlackRock Inc., an international investment management firm.

“PNC was innovative among larger banks in the development of a lot of things for fee income,” Van Buskirk said. “And from their perspective I think National City is a good complement.”

At the retail level, PNC has been an innovator in its use of technology, Koble said.

“Their technology is very advanced, and it helps them operate efficiently and adapt to competitive situations,” he said.

The bank in August launched what it calls a “virtual wallet,” a streamlined version of its online banking site meant to be more appealing to tech-savvy younger customers.

Fair, steady competitor
Like any business, PNC seeks to grow market share where it operates, but it is not known for taking aggressive measures to do so, said Andrew Hasley, CEO of Allegheny Valley Bank of Pittsburgh, a $372-million-asset community bank that competes with PNC.

“PNC is not one of those banks that goes overboard or plays unfairly,” he said.

“They are competitive, but fair,” he said. “Part of that is because they are a stable, large financial institution that has never needed to do irrational things.”

That has helped PNC establish a reputation in the Cincinnati area, where it has had a presence since the mid-1980s, as a straight shooting, reliable lender, said Doug Compton, president of the southwestern Ohio and northern Kentucky division of Park National Bank, which has 14 branches in that area.

“I think people do in general want consistency from you as a banker,” he said. “Whether your answer is yes or no to them, they just want consistency from you.”

PNC’s approach has largely been devoid of splashy special offers and advertising to bring in new customers, Compton said.

“They have not made a lot of noise, but have quietly come into the market and have grown,” said Compton, a banker for 20 years. “They’re not someone we could grow to hate.”

The addition of National City will give PNC 16.18 percent of Ohio’s deposits, good enough for tops in the state, according to June 30 data from the Federal Deposit Insurance Corp. Its history in Ohio dates back to the mid 1980s, when it bought Central Trust Co. to get into the Cincinnati market. That deal brought it branches around the state as well, but PNC sold them, including a dozen in the Dayton area sold to Fifth Third Bancorp in 1995. It also got a branch in Newark that it sold in 1991 to Bank One Corp.

“They made the decision that (other banks) made in some areas, that if they couldn’t be first or second in a market then they probably didn’t want to have a presence,” Van Buskirk said.

But 20 years after its first foray into the state, it appears PNC has finally found a way to become top dog.

“They’re coming back in and will be the largest bank in Ohio,” Van Buskirk said.

PNC Financial Services Group Inc.

• Business: Full-service bank with 977 branches in Pennsylvania, New Jersey, Maryland, Virginia, Delaware, Ohio, Kentucky, Indiana and Washington, D.C.
• Based: Pittsburgh
• CEO: Jim Rohr
• Employees: 20,126
• Web site: pnc.com
• 2007 revenue: $10 billion
• 2007 profit: $1.5 billion
• Assets: $145.6 billion
• 52-week high: $87.99
• 52-week low: $41.51
• Oct. 28 close: $65.44
• Market:ticker: NYSE:PNC

614-220-5450 | aburns@bizjournals.com