PNC unloading BlackRock stake; Deutsche Bank sells €$1.25B of unsecured debt (2024)

Receiving Wide Coverage ...

Cashing out

PNC Financial, BlackRock’s top shareholder, is selling its $17 billion stake in the world’s largest asset manager, “freeing up the bank to pursue potential acquisitions, ” the Financial Times reported. “PNC holds a 22% stake in the company that it purchased in 1995, representing around 35 million shares.

“PNC’s decision to sell comes as U.S. banks set aside tens of billions of dollars to deal with potential losses. PNC suffered a 28% fall in net income for the first quarter, as loan loss provisions increased almost fivefold to $914 million.”

“PNC Financial first invested $240 million in BlackRock in 1995,” the Wall Street Journal said. “PNC got a steady stream of fees and profits from the asset manager’s meteoric growth in the last decade as BlackRock sucked up a growing share of money flowing into index and exchange-traded funds.”

“When BlackRock went public in 1999, PNC still held a stake in the firm. Even as other banks cut their stakes in asset management businesses to shed risks after the 2008 financial crisis, PNC continued to hold a stake,”

PNC CEO William Demchak “said the divestiture will eliminate any regulatory obligations tied to owning a large stake in another diversified financial services company,” American Banker’s Paul Davis reports.

Raising capital

Deutsche Bank sold €1.25 billion of new bonds on Monday “that count towards its capital buffers, taking advantage of renewed investor demand for financial institutions’ higher-risk debt following the coronavirus sell-off.” The bonds were sold at a yield of 5.7%, “making it the first institution to raise bank capital in euros since coronavirus-related lockdowns took hold in March,” the FT said.

“The resumption of new capital deals from European banks indicates that demand has rebounded for such debt, after investors earlier dumped bonds that are more exposed to losses if financial institutions run into serious trouble.”

“The bank is also offering to buy back up to €2 billion in senior debt by the end of this week that can no longer be used to meet certain regulatory requirements,” the Journal said. “The move will allow the lender to improve its capital structure as credit markets have stabilized and premiums are lower.”

“Deutsche Bank is taking advantage of a decision by the European Central Bank to allow lenders to use lower-quality securities, such as unsecured bonds, to meet capital requirements. The ECB eased its requirements in March to ensure the flow of credit to businesses and households.”

Financial Times

Burning bridges

Turkey has lifted its currency markets ban on Citigroup, UBS and BNP Paribas “just days after it was introduced, the latest step in an unpredictable relationship with foreign lenders and investors.” The country’s financial regulator, the Banking Regulation and Supervision Agency, imposed the ban last week after it claimed the banks “had failed to settle their lira liabilities on time.” The agency said those liabilities had been settled, but “investigations into foreign banks that were late in fulfilling their obligations will continue.”

“The Turkish government has become a lot more abrasive with foreign banks,” an executive at a large New York-based bank said, adding that the country was “slowly burning a lot of bridges.”

Too chummy

The European Banking Authority “should not have allowed its executive director to leave to run a high-profile lobby group that represents many of the world’s biggest financial groups,” the European Ombudsman, an independent EU watchdog, said Monday. The ombudsman, Emily O’Reilly, said the EBA “should have vetoed Adam Farkas’s move this year to become head of the Association for Financial Markets in Europe, which brings together banks such as JPMorgan, Société Générale and UBS,” the FT said.

“Public authorities cannot allow themselves to become proxy recruiters for the industries they are regulating,” O’Reilly said.

Elsewhere

PPP for all

A U.S. district court judge in Michigan ruled Monday that “disfavored” businesses such as payday lenders and strip clubs cannot be prevented from getting loans through the Small Business Administration’s Paycheck Protection Program, Reuters reported. “U.S. District Judge Matthew Leitman in Flint, Michigan, issued a preliminary injunction barring the U.S. from enforcing a rule to exclude businesses that present live performances or sell products of a ‘prurient sexual nature’ from getting the loans.

“While Leitman said his order was not a ‘nationwide injunction’ covering all PPP applicants, it is a win for a variety of businesses, also including payday loan companies, that have sued over being excluded from the PPP,” Reuters said.

Quotable

“PNC [is] very well-positioned to take advantage of potential investment opportunities that history has shown can arise in disrupted markets.” — PNC CEO William Demchak, announcing the bank’s sale of its $22 billion stake in BlackRock, the world’s largest asset manager.