NEW YORK - Rumors are swirling around that PNC the 6th largest bank in the United States is looking to buy Bank Atlantic or Regions Financial. It is unlikely they will buy Bank Atlantic when the company can be bought in the future at a cheaper price due to a high potential of it entering receivership. Regions Financial is an interesting target. The company currently trades at under its tangible equity but PNC should be wary. Regions has a large amount of non performing loans and the bank appears to be close to worthless under its current structure. If PNC were to acquire Regions, it would likely charge off at least $10 billion of the bank's assets. There is a large difference between the value of RF's loans and their current fair value. The current price of RF is not much of a discount. But the future value that RF could provide PNC would likely be to mouth watering to miss out on.
PNC is easily able to fund the acquisition with its current balance sheet items. The question is will it want too? Inside PNC, RF is a much more valuable entity since the shares get a large discount due to uncertainty and potential dilution for repaying TARP funds. RF would increase the size of PNC by another 50% and it would move to being the 5th largest bank in the United States ahead of long time rival U.S. Bancorp.
We contacted Regions and PNC for an update, they picked up the phone but said they could not respond to our questions.
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