PNC Financial Services has set its sights on expanding its footprint with its $11.6 billion purchase of BBVA USA, but the acquisition will do little to shake up the consumer lending status quo in auto finance.
The acquisition allows PNC to build or expand its presence in some of the largest U.S. markets, including the states of Alabama, Arizona, California, Colorado, Florida and Texas, where BBVA has branches, accelerating the company’s growth strategy, Rob Reilly, PNC executive vice president and chief financial officer, said on a Nov. 16 investor conference call.
PNC is not new to integrating large franchises, having purchased RBC Bank, the U.S. retail banking subsidiary of Royal Bank of Canada, in 2012. PNC has focused on organic growth for the last five years, but saw an opportunity to quickly enter new markets through the BBVA purchase, Gerard Cassidy, managing director and large cap banking analyst for RBC, told Auto Finance News.
“[PNC] jumped at the opportunity, and this will now accelerate their de novo strategy in selected markets like Texas, because of BBVA’s existing franchise already being there,” Cassidy said. “This combination is going to give PNC an opportunity to expand into the fastest-growing regions of our country … primarily through the commercial banking business lines.”
BBVA, like PNC, has a balance sheet that is majority commercial lending, and the acquisition won’t have a large impact on PNC’s indirect auto lending business, Cassidy noted.
In fact, BBVA holds little market share in California, Alabama and Colorado, according to September lien data from AutoCount. The largest opportunity for growth in retail auto lending lies in Texas, the nation’s largest auto finance market, according to an AFN analysis. PNC lost 68.5% of its market share in September, with 377 auto liens when compared with last year. By contrast, BBVA had 1,739 auto liens created through car dealerships, a 30.4% month-over-month increase and 3.1% year-over-year increase.
Pittsburgh-based PNC will add $66 billion in loans to its balance sheet, including BBVA’s $4.1 billion auto loan portfolio, ratcheting up its outstandings to $20.5 million. PNC will remain the 19th-largest auto lender in total outstandings, according to Big Wheels Auto Finance Data, behind TD Auto Finance’s $24.1 billion portfolio. PNC will convert the majority of BBVA’s technology systems to PNC’s, an investment expected to reduce expenses for the bank, according to the Nov. 16 investor presentation.
Still, the acquisition could open the door for PNC to pursue floorplan financing with new dealer customers, RBC’s Cassidy told AFN. “They’re going to look to expand their commercial lending businesses in markets in which they really don’t have a presence,” he said. “This could allow them to pursue, more aggressively, dealers as customers.”
PNC is using the proceeds of the sale of its investment in BlackRock, the largest asset manager in the U.S., to fund the transaction, which is expected to close mid-year 2021, according to a PNC company release. The deal is subject to regulatory approval. Neither PNC nor BBVA could comment further on the details of the acquisition.
PNC’s acquisition of BBVA is the second M&A deal in auto finance in a year. Earlier this year, SunTrust Bank and BB&T finalized a merger of equals that resulted in Truist Bank, the 18th-largest auto lender, according to Big Wheels Data.