Powerful PNC has Pittsburgh roots

October 10, 2006|By Allison Connolly | Allison Connolly,Sun reporter

It wasn't long ago that Pittsburgh's largest bank, PNC Financial Services Group, was considered a takeover target during rampant industry consolidation. Now its name is replacing a Baltimore institution.

PNC's proposed $6 billion purchase of Baltimore's Mercantile Bankshares Corp. would make it the nation's 11th largest in terms of deposits and 16th in terms of assets, with more than 1,000 branches from Ohio to Washington.

Those rankings were widely touted by business leaders back home yesterday, who say the bank has played a key role in the Pittsburgh's revitalization, underwriting arts and educational programs and investing in downtown real estate.

"PNC has emerged in the 21st century as a dynamic leader in our region's economic growth," said Andy Masich, president and CEO of the Sen. John Heinz Pittsburgh Regional History Center.

"This further enhances their prestige in the city," said Jeffrey Letwin, managing partner at Schnader, Harrison, Segal & Lewis LLP in Pittsburgh and chairman of the board of VisitPittsburgh.

PNC helped Pittsburgh keep the Pirates baseball team, whose home field is PNC Park. It is building Three PNC Plaza, a $170 million office, retail, hotel and condo tower, though the project has drawn some criticism because the bank received an $18 million tax break.

"The cheerleaders would say it's a show of confidence in the city," said Frank Gamrat, senior research associate at the Allegheny Institute for Public Policy, a conservative think tank focused on local government. "The bank should not be in the landlord business."

City business leaders say Three PNC Plaza will draw more people and businesses to downtown.

The bank actively has pursued a policy of being a good corporate citizen, said PNC spokesman Patrick McMahon. The bank pledged $100 million over 10 years to its "grow up great" education program for preschoolers.

Employees can earn up to 40 paid hours for volunteering for that program and others.

The bank also has made an environmental commitment to build "green structures" that make use of natural light and have efficient heating and air conditioning systems. And the company prides itself in making Working Mother magazine's annual "100 best companies for working mothers" for the last five years.

"They are clearly out in front in this community in terms of the cultural community and sports," said F. Michael Langley, chief executive officer of the Allegheny Conference on Community Development.

The conference was formed in the 1940s by community leaders, including names like Heinz and Mellon, to promote new jobs and business in the Pittsburgh area.

PNC chairman and chief executive James E. Rohr is currently chairman of the conference as well as of the city's 250th anniversary celebration in 2008.

To kick off a two-year promotion of the anniversary, the city last month unveiled a new marketing slogan: "Pittsburgh: Imagine what you can do here."

"Jim Rohr embodies that," Masich said. "He's an energetic guy and great spokesperson for our community."

PNC is Pittsburgh's oldest bank, having been founded in 1852 as Pittsburgh Trust and Savings Co. In 1982, Pittsburgh National merged with Philadelphia's Provident National Corp., to form PNC Financial Corp. in what was then the largest bank merger in history.

In 1986, PNC ventured out of the state to buy Citizen's Fidelity Corp. in Louisville, Ky. and Cincinnati's Central Bancorp. It outpaced Pittsburgh's Mellon Bank Corp., which had long been the biggest bank in town but got caught with bad loans to developing countries and oil and natural gas producers.

But PNC itself began racking up losses about 1990 when the commercial real estate industry soured. Then it failed to foresee rising interest rates in 1994, which cut 1995 profits. PNC was considered a takeover target amid frenzied consolidation in the industry.

But it stayed the course and continued to grow. In May 2005, PNC paid $643 million for Washington's Riggs National Corp., known as the "bank of presidents" because several first families had accounts there.

Just before the acquisition, Riggs pleaded guilty to a felony charge of failing to notify authorities of suspicious transactions among foreign customers, including Chilean dictator Augusto Pinochet, and paid nearly $31 million in fines.

Last month, PNC garnered attention for eliminating ATM fees for customers worldwide who maintain an average monthly balance of $2,500 or who sign up for certain new products.

The bank currently is archiving bank statements from famed customers, including Abraham Lincoln and Richard M. Nixon. Last week, PNC announced it would give the collection, worth about $5.2 million, to George Washington University, along with a $125,000 grant from the PNC Foundation.

After Riggs, the purchase of Mercantile - even for top dollar - makes sense, said David Danielson, president of Danielson Capital LLC, of Vienna, Va.

"They essentially made a deal in D.C. that they wish they hadn't," he said. "This makes it work. Their franchise is much more valuable now."

The company is wrapping up a restructuring program started last year that eliminates 3,000 jobs and saves the company $300 million, with potential to expand revenue by $100 million a year. As of June 30, the company had shed 2,400 jobs.

PNC reduced its share in BlackRock, one of the largest publicly traded investment firms, after BlackRock merged with Merrill Lynch Investment Managers. The deal closed last week. PNC also has a worldwide mutual fund processing center called PFPC, which has $1.9 trillion in assets.

Danielson said he expects PNC to launch an ad blitz to familiarize consumers in Mercantile's territory with the name.

"Can you believe they're going to take down the Mercantile sign, one of the most recognizable in Baltimore, and replace it with PNC bank?" he said. "Everyone's going to ask, who is PNC?"

allison.connolly@baltsun.com

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