The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Advantage Dealbook: More from sub $5 bln deals and bank downgrades

RBC Bank branch at 3732 North Roxboro Street i...

Image via Wikipedia

Even as China’s outbound investments climbed to $55 bln to match its incoming FDI of $45 bln, the deals remained in strong resource plays led by the large PetroChina play in Brazil.(update: Encana etc failed yet again but)

The deal canvas otherwise looks hot with BofA planning to rid itself of its remaining stake in China Construction Bank, and this time at a profit. As previously stated, PE firms are also out there looking for a regular IPO for their own Capital while other banks like ING and HSBC jiggle their US portfolio. Cap One’s purchase of ING led by Morgan Stanley and Barclays added a cool $10 bln o the month’s deal numbers. ING is also selling its European Car leasing business as it turns “Back to Basics” divesting some businesses for Capital refurbishment without the Dutch government Covenants for the same. The Car leasing business will likely deliver another $4 ln in cash/stock to correspondingly build up its Capital buffer

Royal Bank of Canada’s retail business has been purchased by PNC Financials for a similar $3.4 bln. RBC branches add $25 bln in assets to the $459 bln PNC book, from 6 states in South East US from its acquisitions of Centura, Eagle Bancshares and Admiralty franchises

The stock part of the deal will be limited to RBC not owning more than 4.9 percent of PNC’s shares at closing of the deal, expected in March 2012.

PNC executives said any common stock issuance tied to the deal will depend on the regulatory climate and economic conditions when it closes.

PNC expects to fund the cash portion of the buy with cash on hand, debt issuance and a preferred stock offering.

The purchase price represents a $112 million discount to the tangible book value of the unit.

Pittsburgh-based PNC will also buy RBC’s related credit card assets for $165 million.

RBC expects the deal to add to 2012 earnings, while PNC expects the purchase to add to its earnings by the end of 2013 or sooner depending on the stock component of the deal, the companies said in separate statements.

PNC projects it can cut $230 million in annual expenses from RBC’s U.S. operations, and is projecting an internal rate of return of more than 19 percent on the bank.

This deal adds to Bofa ML and JP Morgan

This also leaves BB*T to bid for other bank franchises in play

Walmart’s earlier deal announced with a South African retailer Massmart worth $5 bln has also been completed. Walmart got approval for its stake purchase of 51% from the Competition Commission last month

Meanwhile as CDS’s surge in bank plays, drubbing for bank socks has been further underwritten by bank analysts at Citi today morning:

Citi’s estimate for Morgan Stanley earnings goes to 43 cents a share from 59 cents. The Goldman expectations shrink to $2 a share from $3.75. Even the full year and 2012 estimates get a haircut from Citigroup. The earnings estimate on J.P. Morgan is trimmed by 3 cents to $1.36 a share. Goldman’s price target drops to $180 from $200, while Morgan Stanley gets trimmed to $26 from $28.(Deal Journal)

Bank Results Season

6 comments on “Advantage Dealbook: More from sub $5 bln deals and bank downgrades

  1. Pingback: Making Banks rethink salaries | Advantage Change 2011 ed. | The Banking and Strategy Initiative

  2. Pingback: Nestle buys another Chinese candy company | Advantage Dealbook | The Banking and Strategy Initiative

  3. simple 1200 calorie diet
    July 23, 2011

    Heya, this is ideal content. I absolutely enjoyed. Nevertheless there are a lot of off topic comments. I truthfully would suggest you to eliminate or something like that. That is only my opinion. All the best !!

    Like

  4. Mark Landefeld
    July 27, 2011

    Hello, this is a definitely fascinating web blog and ive loved reading many with the content and posts contained upon the internet site, maintain the great work and hope to read a whole lot much more exciting content within the time to come.

    Like

  5. Pingback: Capital One bids: A profitable HSBC Credit Cards unit and we are a bigger bank | The Banking and Strategy Initiative

  6. bank franchises
    November 24, 2011

    Very great post. I just stumbled upon your blog and wanted to say that I’ve truly enjoyed browsing your blog posts. After all I’ll be subscribing to your rss feed and I’m hoping you write again very soon!

    Like

Comments are closed.

Archives

%d bloggers like this: