PNC Financial Services Group Inc. (PNC) announced that it will redeem preferred securities worth $500.1 million. The redemption will include PNC's Non-Cumulative Perpetual Preferred Stock, Series M. The preferred securities would be redeemed at 100% of the liquidation amount, which is $100,000 per share. The redemption will take place on December 10, 2012.
National City Preferred Capital Trust I will use the proceeds of the aforementioned redemption to fund the redemptions of 12% Fixed-to-Floating Rate Normal APEX Securities and Common Securities on December 10, 2012. The trust intends to utilize $500 million of the proceeds to redeem all the outstanding shares of its 12% Fixed-to-Floating Rate Normal APEX Securities, and the balance amount for redeeming the Common Securities.
Moreover, the Normal APEX Securities has a distribution rate of 12.0% and will mature on December 10, 2043. Further, these will be redeemed at $1,000 per share. The redemption amount will also include accrued and unpaid distributions until the redemption date arrives. Wilmington Trust Company – a subsidiary of M&T Bank Corporation ( MTB) – will act as the paying agent.
We believe this redemption will lead to a reduction in PNC Financial’s borrowed funds, which will go a long way in improving the company’s overall financials. As of September 30, 2012, the bank’s borrowed funds stood at $43.1 million compared with $35.1 million as of September 30, 2011.
We expect the company to maintain its superior position in the market, based on its positive approach to market conditions and improving top-line growth. However, the regulatory reforms might affect the company’s near-term results to some extent.
PNC Financial’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its fundamentals, we also have a long-term Neutral recommendation on the stock.
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