PNC Financial Services Group Inc. Chairman, President and CEO William Demchak threw cold water on any speculation that the bank had changed its skeptical view on bank acquisitions.
Small banks are “just wildly mispriced for what it is we would end up wanting from them,” he said at an investor conference. “We don’t want their balance sheet. We want their deposits, and they’re trading at two times book value. They just don’t work for us.”
So far in 2019, the median deal value-to-tangible common equity ratio for bank acquisitions announced in the U.S. is roughly 160%, according to S&P Global Market Intelligence data.
Larger deals are also unappealing because “the strategic risk of taking a time-out to integrate something that actually doesn’t change the viability of your long-term plan just doesn’t make sense,” Demchak said.
The executive did offer a caveat. “If we saw another National City, we would do it, if it was a good deal,” he said, referring to PNC’s acquisition of the troubled Cleveland bank during the financial crisis.
“I should never say never,” Demchak said. “You should just assume we’ll be rational about it.”