PNC Financial Services Group (NYSE:PNC), which is BlackRock Inc.’s (NYSE:BLK) largest stockholder, has indicated that it will sell its stake of around $17.3 billion in the asset management company to fee up the bank to consider potential acquisitions.
PNC is selling its 22% stake in BlackRock
On Monday, Blackrock indicated that the Pittsburgh-based financial institution is planning to exit its full stake in the biggest asset manager in the world. Currently, PNC holds around 22% interest in the company, which it acquired almost 25 years ago. The stake represents around 35 million shares through convertible preferred and common stock.
The move y PNC comes as various US banks commit hundreds of billions to handle possible losses. This is in anticipation that the closing of businesses and the growing unemployment will make it difficult for borrowers to service their debts. For instance, in the first quarter, PNC suffered an income drop of around 28% after an increase in loan-loss provision to around $914 million.
While speaking about the sale, Bill Demchak, the CEO of the bank, stated that they felt the right time to sell was not. He added that the move will help PNC realize a significant return on its investment, which will significantly enhance the company’s liquidity and solid balance sheet. Demchak said that the transaction will leave the company in a better position to capitalize on possible investment opportunities.
Sale of stake to bolster PNC’s capital ratio
Sources familiar with PNC’s decision indicated that the move will boost the company’s capital ratio. On the other hand, it will put the company in a position to take advantage of the disruptions expected this year to acquire assets. However, another source indicated that the company currently doesn’t have any specific target in mind. Most importantly, PNC will have significant cash for inorganic and organic growth of its main lending business.
For BlackRock, the removal of the company’s largest stockholder means that power will now be consolidated under its founder Larry Fink who is currently the CEO and chairman. Once the sale is complete, PNC CEO will leave BlackRock’s board.