PNC Financial Services Group, Inc. announced Friday that it is buying National City Corp. for approximately US$5.2 billion in PNC stock.

Earlier this year, there was speculation that Bank of Nova Scotia could be a possible buyer of Cleveland-based National City.

In addition to the purchase price, Pittsburgh-based PNC expects to incur merger and integration costs of approximately US$2.3 billion. The transaction is expected to result in the reduction of approximately US$1.2 billion of noninterest expense through the elimination of operational and administrative redundancies.

“The acquisition of National City will increase our core deposit base to US$180 billion, making PNC the fifth largest U.S. bank by deposits. At a time when core funding is key, we see our deposit strength as an important success factor. Upon closing the transaction, we will implement our successful business model and execute our strategies for managing risk, achieving cost efficiencies and growing high-quality revenue streams,” said James Rohr, chairman and chief executive officer of PNC. “We believe this strategic combination will continue PNC’s efforts to build capital strength and shareholder value.”

PNC will also issue to the US Treasury US$7.7 billion of preferred stock and related warrants under the TARP Capital Purchase Program subject to standard closing requirements, enabling it to strengthen its capital position. “We are also gratified that we have been selected to participate in Treasury’s Capital Purchase Program, which has helped to put this transaction on a very solid footing,” said Rohr.

IE