PNC to buy Ohio bank in $5.2b stock deal

PNC Financial Services Group is receiving some of the first US Treasury funds earmarked to help regional lenders. (Jeff Swensen/Getty Images)

NEW YORK - PNC Financial Services Group Inc., Pennsylvania's biggest bank, plans to buy National City Corp. for about $5.2 billion in stock after receiving some of the first US Treasury funds earmarked to help regional lenders.

PNC will pay $2.23 a share to create the fifth-largest US bank by deposits, the Pittsburgh lender said yesterday. Some $7.7 billion of Treasury funding, part of the government's $250 billion plan to recapitalize banks, "put this transaction on a very solid footing," PNC said.

National City shareholders will get 19 percent less than the closing price Thursday. The Cleveland bank, once among the nation's top 10 subprime lenders, joins Washington Mutual Inc. and Wachovia Corp. in submitting to takeovers after losses tied to failed home loans.

While PNC is still profitable, National City had more than $3 billion in losses during the past five quarters, and its stock has plunged 88 percent this year. The combined bank will have about 2,750 branches, mostly in the Midwest and Mid-Atlantic regions, and some will be closed, PNC said. The deal is expected to be completed by year-end and add to earnings in 2010.

PNC's capital injection is the first for phase two of the $250 billion program for financial companies, a person familiar with the matter said.