PNC Financial Services Group Inc., U.S. Bancorp and Toronto-Dominion Bank are among firms that may benefit as Bank of America Corp. sells assets to raise capital.
PNC this year pushed deeper into the southeast, a Bank of America stronghold, with the purchase of Royal Bank of Canada’s U.S. retail unit. U.S. Bancorp is investing in corporate banking and wealth management, a domain of BofA’s Merrill Lynch, as it increases offerings for high-net-worth clients. Toronto-Dominion agreed last month to buy Bank of America’s credit-card business in Canada and also has expanded in the U.S.
“The winners out of this will be those banks that aren’t in the too-big-to-fail category,” said Blake Howells, an analyst at Portland, Oregon-based Becker Capital Management Inc., which oversees $2.2 billion, including Bank of America shares. Regional lenders and banks aiming to round out product lines will benefit most, he said.
Bank of America Chief Executive Officer Brian T. Moynihan is selling businesses to build capital as housing losses drain resources and regulators tighten rules on how lenders manage funds. The Charlotte, North Carolina-based company also announced plans this week to cut 30,000 jobs in the next few years to trim costs and reverse the decline of its shares.
Moynihan, 51, aims to boost investor confidence after the stock slid 54 percent since he became CEO in January 2010. It’s this year’s worst performer in the Dow Jones Industrial Average. His tenure includes posting a record $8.8 billion quarterly loss, committing $30 billion to clean up faulty mortgages and selling about $40 billion of assets and preferred shares.
Jerry Dubrowski, a Bank of America spokesman, declined to comment about how the lender’s overhaul may benefit competitors.
U.S. Bancorp and Pittsburgh-based PNC may be poised to expand, Howells said, as Bank of America shrinks and cedes its title as the biggest U.S. lender by assets. Other so-called super-regional banks could seize the opportunity, according to Rebel Cole, a former Federal Reserve economist and now a finance professor at DePaul University in Chicago.
“The super-regionals probably have the most to gain,” Cole said in a phone interview. “I don’t see where the other big banks -- the four behemoths -- will do anything, and if anything they may see the handwriting on the wall and get smaller themselves.”
PNC, which bought Cleveland-based National City Corp. in 2008, paid less than tangible book value to RBC for 420 branches in Alabama, Florida, Georgia, the Carolinas and Virginia.
“Our planned acquisition of the RBC Bank provides us with significant opportunities to increase clients and cross-sell products and services,” PNC CEO James Rohr, 62, said Sept. 12 at an investor conference in New York.
Rohr declined to answer analysts’ questions about whether the bank was picking up customers from weakened rivals. Spokesmen for PNC, U.S. Bancorp and Toronto-based TD declined to comment about whether their companies expect to benefit from Bank of America’s retrenchment.
U.S. Bancorp CEO Richard Davis earlier this year highlighted the Minneapolis-based firm’s recent expansion in corporate banking.
“The coup de grace has been the absolute and undeniable growth of our corporate bank,” Davis, 53, said during a June 2 investor presentation. “We are now a very high-quality national -- even global -- corporate bank.”
A month later, Davis said the lender wouldn’t make an acquisition so big that it would alter the way the company operates or manages its balance sheet.
The ranks of expanding lenders include Capital One Financial Corp., the only gainer this year in the 24-company KBW Bank Index. The McLean, Virginia-based firm agreed in June to purchase ING Groep NV’s U.S. online bank, a deal that would make Capital One the fifth-largest U.S. bank by domestic deposits. Last month, the company said it would buy about $30 billion of credit-card assets from London-based HSBC Holdings Plc.
Bank of America, the KBW’s worst performer of 2011 through yesterday, is divesting non-U.S. credit-card assets. It will sell the Canada card unit, with $8.6 billion in loan balances, to Toronto-Dominion and plans to exit the U.K. and Ireland, the firm said last month. Its FIA Card Services unit sold a $1 billion portfolio to Regions Financial Corp., the 10th-largest U.S. bank by deposits, and $200 million in loan balances to Sovereign Bank, a unit of Madrid-based Banco Santander SA.
JPMorgan, Wells Fargo
Moynihan also is overhauling home-lending operations, which posted a $14.5 billion loss in the second quarter. In February he split the mortgage division, separating distressed loans from performing mortgages and new lending. Bank of America said Aug. 31 that it plans to sell or shut its correspondent-mortgage unit, which buys loans from smaller companies.
That may benefit the lender’s biggest rivals, including JPMorgan Chase & Co. and San Francisco-based Wells Fargo & Co.
“On the mortgage side it’s pretty clear JPMorgan and Wells Fargo are the winners,” Howells said.
Wells Fargo had 28.4 percent of the residential mortgage market in the first quarter, up from 22.5 percent a year earlier, while New York-based JPMorgan made 12.8 percent of U.S. home loans, up from 9.6 percent a year earlier, according to data compiled by Bloomberg. Bank of America’s share declined to 19.4 percent from 20.9 percent, the data show.
“We just don’t need to be the biggest,” Moynihan said in a Sept. 6 interview. “It’s time to simplify the organization, streamline the organization and make sure our business processes are relevant when you have a smaller, more focused company.”
JPMorgan became the largest U.S. bank by deposits in the second quarter with $1.05 trillion, surpassing Bank of America’s $1.04 trillion. New York-based Citigroup Inc. ranks third with $866.3 billion, followed by Wells Fargo with $853.6 billion.
MetLife Inc., the insurer whose banking unit has increased mortgage lending, also may benefit. MetLife Bank agreed in June to become the “preferred mortgage lender” of KB Home, replacing Bank of America in a mortgage-distribution deal. KB Home is the Los Angeles-based builder that targets first-time home buyers.
“Whoever is the most aggressive about gaining market share will benefit,” said Christopher Thornberg, co-founding principal of Beacon Economics LLC, a Los Angeles consulting firm. “You can pick up assets at a good price and clean them up and generate value.”