PNC Sells off BlackRock Inc.
PNC Financial Services Group Inc. is selling off its BlackRock Inc. stake. The company is cashing out one of the financial industry’s most lucrative bets in the stock market.
The move will bolster the bank amid the coronavirus pandemic. It will allow it to seize opportunities to grow if rivals stumble.
The Pittsburgh-based lender announced plans Monday to unload its roughly $17 billion holding in the world’s largest asset manager. It will be through a public offering.
PNC is the company’s largest shareholder, a relationship that began about 25 years ago. The bank bought the business from Blackstone Group Inc. Steve Schwarzman, Blackstone’s leader, has said selling that division was “a heroic mistake.”
The decision to exit the investment now surprised some analysts. That was after PNC long credited its BlackRock holding with diversifying earnings.
Banks across the industry are facing the prospect of loan defaults. Executives at PNC are positioning for another bet.
They are betting that the firm can better withstand the turmoil and potentially make a major acquisition.
The Sale of BlackRock Shares
The sale of the company’s stocks likely signals that PNC is looking to make a deal during the market disruption. It is consistent with its past behavior. This was a statement from Kyle Sanders, an analyst at Edward Jones.
He pointed to the firm’s takeover of National City Corp. during the 2008 crisis. He said it’s probably hoping for another opportunity, likely another regional bank.
PNC currently holds 22% of the company’s outstanding shares. The bank will exit the stake through a public secondary offering. This is with the buying back of $1.1 billion of the shares directly from the firm.
Moreover, Morgan Stanley, Citigroup Inc., and Evercore ISI are joint bookrunners.
PNC Chief Executive Officer William Demchak has said now is the right time to “unlock the value of their investment. He is also on BlackRock’s board.
The move enhances PNC’s balance sheet and will leave the company very well-positioned to take advantage of potential investment opportunities. History has shown opportunities can arise in disrupted markets.
The decision was prompted in part by the widening gap between PNC’s market value and BlackRock’s.
BlackRock shares were down less than 2% this year by Monday’s close of stock trading. That is compared with a 36% drop for PNC. The broader S&P Regional Banks Select Industry Index has lost 40% of its value in 2020.
BlackRock fell an additional 2.3% in extended New York stock trading after the announcement.
Even with this year’s selloff, PNC’s stock has more than doubled since the end of 2008. This was when it bought National City for about $5 billion. During that time, it has far outperformed the broader KBW Bank Index tracking 24 of the nation’s largest lenders.
Herman Chan, an analyst said the bolstered capital levels reinforces PNC as a safe-haven bank. It stands ready to capitalize on their view.
