For Immediate Release
Chicago, IL – December 21, 2011 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include HSBC Holdings Plc ( , PNC Financial Services Group Inc. ( (PNC - Analyst Report) , Royal Bank of Canada ( (RY - Snapshot Report) , Flagstar Bancorp Inc. ( (FBC - Snapshot Report) and BankAtlantic Bancorp Inc. ( .
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Here are highlights from Tuesday’s Analyst Blog:
China Tries Deflating Realty Bubble
The Chinese government is attempting to calm the country’s overheated property market. Goaded by measures such as ownership restrictions on property and taxes, home prices declined in big cities in November. But this is also a tell-tale sign of China’s flagging growth. China’s Central Bank had recently lowered the cash reserve ratio to help commercial banks push lending and revive the economy.
Last month, the World Bank identified four major risks to China’s financial markets in its Financial Sector assessment. Two of these were disintermediation or lending outside the formal banking sector and high real estate and commodity prices. Non-formal lending is partly to blame for the real estate asset bubble.
The second largest economy in the world after the US, China is projected to grow at 8.8% in 2012, but less than 9.3% in 2011. The Asian Development Bank had earlier projected a growth rate of 9.1% for 2012. China had grown at 9.7% since Deng Xiaoping’s market reforms began in 1978-79. Growth accelerated to 11% during 2003-07. Between 2008 and 2009, the average GDP growth was 9.4%. In 2010, China grew by 10.3%.
In recent times, the Asian powerhouse’s economic activity has been fragile. The Purchase Managers Index (PMI) of HSBC Holdings Plc ( for China’s Services sector fell to 52.5 in November from 54.1 in October – the slowest in three months.
China’s official PMI for the non-manufacturing sector touched 49.7 in November, significantly below 57.7 recorded in October according to the China Federation of Logistics and Purchasing. The country’s official manufacturing index declined to 49.0 in November from 50.4 in October.
Fed Nod to PNC-RBC Deal
PNC Financial Services Group Inc. ( (PNC - Analyst Report) received the approval from the Federal Reserve to acquire RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada ( (RY - Snapshot Report) . The approval takes PNC Financial a step nearer the completion of the deal, slated for the first quarter of 2012.
In June 2011, PNC Financial announced its plan to purchase RBC Bank (USA) 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 U.S. banks, with 2,870 branches. PNC Financial expects the acquisition to be immediately accretive to earnings (excluding integration costs) upon closing.
Recently, PNC Financial has been notified that the Board of Governors of the Federal Reserve System had no objection to the proposed revisions to the capital actions submitted by the company as these pertain to the acquisition of RBC Bank (USA).
Accordingly, the company does not plan to issue any share of PNC common stock as part of the consideration payable to Royal Bank of Canada at closing, or to repurchase any PNC Financial common share in 2011.
PNC in Expansion Mode
Of late, PNC Financial 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 associated businesses and retail deposits worth approximately $210 million at the closing. PNC paid the Bank net book value of the acquired real estate plus fixed and other personal assets associated with the branches. The deal is a strategic fit for PNC Financial as it will expand operations in Atlanta and add to its competitive edge.
With over 70 branches located in the Atlanta metro area, including those that it plans to add from its pending acquisition of RBC Bank (USA), this purchase would aid in expanding its retail banking business. It would also leverage its corporate banking and wealth management prospects.
In mid-2011, PNC Financial also completed the acquisition of 19 branches from a subsidiary of BankAtlantic Bancorp Inc. ( . Additionally, two related facilities in the Tampa - St. Petersburg area and associated deposits were also handed over to PNC as part of the sale.
PNC'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 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 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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