January 9, 2009: PNC Financial Services, Wisely Moving Ahead

The recent acquisition of National City Bank assets by PNC Financial Services Group headquartered in Pittsburgh bodes well for the company. Using TARP funds wisely with an extra incentive from the Feds, PNC moved quickly to capture not-all-that-troubled National City Bank for a song, with the deal closing December 31st. This is a great fit for PNC. The company will ultimately profit handsomely from National City's poorly timed, yet strategically placed expansion into the Chicago and Florida markets. Significantly, National City by luck or design tapped into two significant Latino areas with an expanding and generally fiscally conservative middle class. True, the mortgage business and over extension of generous credit that National City proffered was in retrospect a pathetic business model which led in large part to their demise. PCN gets to write off the bad and keep the best of National City, most of which are solid additions to the PNC portfolio. PNC has to divest National City branches, especially in the Pittsburgh area as part of the deal. That is a non-issue, and PNC will likely slice off even more marginal retail operations to further enhance the bottom line.

PNC is a diversified financial services company that is engaged in retail banking, corporate and institutional banking, asset management and global fund processing services. The company provides services nationally but concentrates its retail operations in Pennsylvania, New Jersey, Washington D.C., Maryland, Virginia, Ohio, Kentucky, Delaware and now Illinois, Indiana and Florida.

PNC Financial Services trades at $48.95/share and sports a solid 5.39% dividend. The stock has traded between $39-88/ share over the past twelve months. The market cap is over $17b.

Importantly, investors following government TARP monies have a good idea which banks the Feds are not going to allow to fail. With PNC's government-blessed takeover of the large National City franchise and perhaps another medium acquisition on the horizon, my hunch is to follow the money and invest with Uncle Sam.

Along with BB&T out east, PNC is my other choice for a regional bank that has the capability of delivering strong returns for shareholders betting that this recession is not circa 1931.