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PNC Financial Services Group Inc. (PNC - Analyst Report) is seeking to expand its business in Canada. The company has applied to convert its corporate banking office in Toronto to a full-service branch, according to a Reuters report, which cited a notice of application in the Canada Gazette.

Notably, in June 2011, PNC Financial announced its plan to purchase RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada (RY - Snapshot Report), for $3.45 billion. The acquisition would help PNC Financial to expand its footprint in the Southeast markets. It would also make PNC Financial the fifth among the U.S. banks, with 2,870 branches. 

PNC Financial expects the acquisition to be immediately accretive to earnings (excluding integration costs) upon closing in the first quarter of 2012.

Last year, PNC Financial also completed acquiring the 27-branch retail bank franchise in Georgia from Flagstar Bank, a subsidiary of Flagstar Bancorp Inc. (FBC - Snapshot Report). Flagstar Bank sold the leases associated with the branches and the related businesses and retail deposits worth approximately $210 million at closing. The deal is a strategic fit for PNC Financial as it will expand operations in Atlanta and add to its competitive edge.

Our Take

PNC Financial's continued strengthening of balance sheet, with focus on risk and expense management, should propel its earnings ahead. Benefits from the 2008 National City acquisition continue to exceed the company's expectations. We also believe that the company's latest acquisition spree and strategic efforts to boost business would be accretive to its revenue.

Yet the top-line headwind is expected to remain in the near term, with continued soft demand for loans and a low interest rate environment. Regulatory issues also remain a concern.

PNC Financial shares maintain a Zacks #3 Rank, which translates into a short-term Hold recommendation. Considering its fundamentals, we also have a Neutral recommendation on the stock.

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