NEW YORK PNC Financial Services Group Inc. is being told by the federal government to sell 61 branches of National City Corp. in western Pennsylvania as a condition for acquiring the bank, according to a person familiar with the matter.
National City's nearly 30,000 employees, from top managers to bank tellers, were being informed during the afternoon that the Department of Justice would announce the order later in the day, the person said on condition of anonymity because he was not authorized to speak publicly about the planned sale. National City is based in Cleveland.
A spokesman for the Department of Justice declined to comment.
The department's order wasn't a surprise; PNC Chairman James Rohr said when the $5.6 billion deal was announced Oct. 24 that the combined bank might be forced to sell branches in western Pennsylvania. The bank becomes the nation's fifth largest by deposits and the fourth biggest in terms of branches.
It was not immediately known which branches would be affected, or what the impact might be on employees or account holders. It was also too early to tell who might be potential buyers. It is fairly common for the government to make branch sales a condition of antitrust approval for a merger between banks that are located close to one another.
Pittsburgh-based PNC is the first U.S. bank to use money obtained under the government's $700 billion bailout program to make an acquisition.
Both banks for years have been mentioned for a possible combination. The banks agreed to the deal because their businesses have been hurt by high-risk mortgage loans, and National City has been weighed down by Ohio's struggling economy.
National City lost $5.15 billion during the third quarter, and was in the midst of a three-year program to cut 4,000 jobs before PNC made an offer to acquire the bank. PNC Financial said it will aggressively take write-downs and increase reserves on National City's loan portfolio when the deal closes.
PNC was profitable last quarter despite credit losses. It projects that National City's battered lending portfolio might incur $19.9 billion of lifetime losses.
The combined bank will have about $180 billion in deposits and more than 2,700 branches located mostly in the Mid-Atlantic and Midwest states as well as Florida. The combined bank also will have the largest deposit bases in Pennsylvania, Ohio and Kentucky.
It was not expected that the Department of Justice would require PNC to unload any other branches, the person said. The acquisition is expected to be completed, pending regulatory and shareholder approval, by the end of the year.
The bank said Wednesday that the integration between PNC and National City could take until late 2009 to be completed once the deal closes.
The credit crisis has forced a number of marriages of high-profile banks, including JPMorgan Chase & Co.'s purchase of Washington Mutual Inc. and Wells Fargo & Co.'s acquisition of Wachovia Corp.