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PNC Financial Services Group Inc. (PNC) announced that it will redeem preferred securities worth $500.1 million. The redemption will include PNC's Non-Cumulative Perpetual Preferred Stock, Series M. The preferred securities would be redeemed at 100% of the liquidation amount, which is $100,000 per share. The redemption will take place on December 10, 2012.
National City Preferred Capital Trust I will use the proceeds of the aforementioned redemption to fund the redemptions of 12% Fixed-to-Floating Rate Normal APEX Securities and Common Securities on December 10, 2012. The trust intends to utilize $500 million of the proceeds to redeem all the outstanding shares of its 12% Fixed-to-Floating Rate Normal APEX Securities, and the balance amount for redeeming the Common Securities.
Moreover, the Normal APEX Securities has a distribution rate of 12.0% and will mature on December 10, 2043. Further, these will be redeemed at $1,000 per share. The redemption amount will also include accrued and unpaid distributions until the redemption date arrives. Wilmington Trust Company – a subsidiary of M&T Bank Corporation (MTB) – will act as the paying agent.
We believe this redemption will lead to a reduction in PNC Financial’s borrowed funds, which will go a long way in improving the company’s overall financials. As of September 30, 2012, the bank’s borrowed funds stood at $43.1 million compared with $35.1 million as of September 30, 2011.
We expect the company to maintain its superior position in the market, based on its positive approach to market conditions and improving top-line growth. However, the regulatory reforms might affect the company’s near-term results to some extent.
PNC Financial’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold rating. Considering its fundamentals, we also have a long-term Neutral recommendation on the stock.
M&T BANK CORP (MTB): Free Stock Analysis Report
PNC FINL SVC CP (PNC): Free Stock Analysis Report
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Zacks Investment Research Inc. is an equity research firm. It offers research through quantitative and qualitative analysis. The firm caters to individual and institutional clients. Zacks Investment Research Inc. was founded in 1978 and is based in Chicago, Illinois.
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