PNC Financial (NYSE: PNC) Reaches Agreement To Repay TARP Funds

Just hours after announcing a sale of its global investment unit to the Bank of NY Mellon (NYSE: BK), PNC Financial (NYSE: PNC) said it reached an agreement with regulators to purchase the $7.6 billion in preferred shares given to the government in exchange for TARP funds.

PNC plans to use funds from an equity raise, coupled with the cash from its recent asset sale to fund the repayment of aid.  The firm is holding an equity offering of $3 billion in common stock and up to an additional $2 billion in senior notes.

PNC’s deal with Bank of NY Mellon will net the firm another $2.3 billion as the transaction is an all cash deal that will transfer ownership of PNC’s global investment management unit.  The unit is a global leader in fund accounting and administration for fund managers.

“With signs of an improving economic environment and stabilizing financial system, we believe now is the appropriate time for us to redeem the preferred shares held by the U.S. Treasury. As a result, we are pleased to have reached an agreement with our regulators to return the taxpayers’ investment in PNC,” said James E. Rohr, chairman and chief executive officer.

“These strategic actions are expected to improve the quality of our capital and position us for further growth,” added Rohr.  “Collectively, we believe these actions are in the best interests of our shareholders, customers and employees.”

PNC is one of the nation’s largest regional banks and performed well up to 2008, when it purchased National City Corp.  The acquisition made PNC the fifth largest bank in the nation, but also led to its need for TARP funds to help digest the transaction.

According to the PNC press release, TARP funds are estimated to be fully paid sometime in February.