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PNC to buy U.S. arm of Spain’s BBVA for $11.6 billion

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Spanish bank BBVA has agreed to sell its U.S. operations to PNC Financial Services for $11.6 billion. The deal marks the first large bank merger since BB&T bought SunTrust in 2019.

Video Transcript

MYLES UDLAND: All right, let's turn our attention quickly on what's been a busy merger Monday as well. And we have some more deals to talk about coming up in the show. But one that we saw earlier today-- PNC buying the US operations of Spanish bank BBVA. And, Brian Sozzi, this really goes to an area of the market that I know you've been focused on, which is the Russell 2000.

A large part of that index is the regional banks. PNC is increasing their footprint here as, you know, they're a very large bank, but they would be considered more in the regional bucket. They're not a Wall Street Bulge Bracket-type bank. And this kind of M&A back in 2018, 19 is what analysts thought would be happening a lot more. And after a couple of quarters of a pause, it does seem like deals are back on for these size--

BRIAN SOZZI: Yeah. Yeah, Myles. Bank mergers are not easy to pull off. You don't see a heck of a lot of them. But also, keep in mind, this comes after BB&T and SunTrust merged in a $28 billion deal last year. And I'm looking, really, right a Key Corp and Region's Financial-- these are the other two regional banks that could very much be in play. You have Regions Financial, $14 billion market cap. Key Corp, $14.5 billion. How are you going to compete with a PNC and a lot of the Bulge Brackets firms in this type of environment? The bigger are getting bigger. And if you're at Regions and you're at Key Corp, how do you compete with these companies? You really can't. So you going to have to merge or sell out.

JULIE HYMAN: Well, and how do you compete in particular in a low interest rate environment, too? That sort of the backdrop that these companies are dealing with. What's interesting, to me, this is the second largest US banking deal that we've seen since the financial crisis, which is sort of surprising to read, in a way. You know, that we just haven't had a lot of big bank deals because the biggest banks are already so large it would be tougher for them to do deals. And it's also the valuation of this that's interesting. At values, BBVA's US business at 19.7 times last year's earnings and about 1.34 times book value. So, you know, you couldn't argue, necessarily, this is the crazy, pricey deal, but, you know, it's not a bargain basement either.

BRIAN SOZZI: Julie, one interesting stat, here, I came up with-- 30 lenders at between $50 billion and $250 billion in assets. It really goes to show you how fragmented this industry is and how much consolidation you can continue to see over the next few years.

MYLES UDLAND: Well, I think you have-- you know, you mentioned-- Julie did-- kind of the end of the financial crisis, right? We're finally doing deals again in the banking space. And you have the competition for assets in a low rate environment with a potentially strengthening sort of Main Street economy, which is going to be more focused on this type of a firm.

Also, we mentioned the fintechs yet. And I know that gets all buzz-y and is Square really competitive to these companies? But that's the kind of stuff that I think investment bankers are thinking about, the folks that are in the ear of these executives, they're saying, hey, what about the next wave of competition?

And I think that, while it's not an explicit part of this deal, I think it has to be, kind of, the subtext of these sorts of mergers. Is, what is the future of banking look like? Because I don't think any of the three of us have any plans to go back to a branch anytime soon if we can avoid it. I don't know if we go to branches now. And I think that's a challenge for all these kinds of firms. Regional footprint aside, like, do your bank on the internet. That's pretty much the way that things go.