If you look at the best-performing banks in the United States over the past few decades, they've all proven to be skilled dealmakers. PNC Financial (NYSE: PNC) is no exception, making three major acquisitions for pennies on the dollar over the past dozen years.
Listen in to the following segment of Industry Focus: Financials, as The Motley Fool's Gaby Lapera and contributor John Maxfield discuss PNC Financial's history of savvy acquisitions.
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A full transcript follows the video.
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This video was recorded on April 3, 2017.
Gaby Lapera:PNC Bankis like Thomas Jefferson, because literally all of its acquisitions are like theLouisiana Purchase. For our listeners who are not as familiar with history,I don't know how many of those there are, theLouisiana Purchase bought us ahuge segment of the country that was originally owned by France,and we got it for super cheap. PNC does that all the time.
John Maxfield:Yeah,I love that comparison. You know what it shows? It's the United Statesreally knows how to work with cycles. If youlook at the Louisiana Purchase, they picked it up for pennies on the dollar because France was a distressed seller at the timebecause they were in the middle of a war with Great Britain. There's the same situationwith Alaska. We picked it up for pennies on the dollar in adistressed sale from Russia, whoneeded to get money at the time. That's the exact same way,not only to grow a country --although I think some people would questionwhether or not the people who are buying and selling thingslike the Louisiana Purchase actually hadtitle to buy and sell the Louisiana Purchase,but that's neither here nor there --the point being, in the bankindustry, if you want to grow,the way to do it is beresponsible, be prudentwith your lending, then wait until troubled times,and thenpick up the lenders who are not able to be responsible or prudent whenthe bubble is inflating. So you can get them for literally pennies on the dollar. Andthat's exactly what PNC has done. About a decade ago, it boughtRiggs Bankafter it ran into some problems,it boughtNational Cityduring the financial crisis and itmore than doubled in size. Just recently,over the past few years, it picked up about 400 branches in another acquisition.
Lapera:Andthese are also great purchases because,much like Alaska had oil, or theLouisiana Purchase had, really,a variety of resources andinteresting things in it, the banks that PNC has beenpicking up have not been in terribly bad positions. It's not likeBank of America andCountrywide. They are much better,in general, in terms of credit quality, after.
Maxfield:Yeah,that's a great point. The big one to think about is thatNational City acquisition that happenedduring the financial crisis. That was actually forced on National Cityby the regulators. Not only that, but then PNC went and gotbillions of dollars worth of money from the TARP program thatNational City was denied and used that money toactually acquire National City. So it's an interesting subplot to all of that.
Gaby Lapera has no position in any stocks mentioned. John Maxfield owns shares of Bank of America. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.