April 7, 2009 / 1:37 PM / 10 years ago

UPDATE 2-PNC to sell 61 branches as part of National City buy

* PNC to sell 57 branches to First Niagara Financial

* Sale as part of requirement related to National City buy

* FNFG shares up 14 pct, PNC stock down 6 pct (Recasts, adds details from conference call, share movement)

BANGALORE, April 7 (Reuters) - PNC Financial Services Group Inc (PNC.N) agreed to sell 61 branches as part of an agreement with regulators related to its acquisition of Cleveland-based National City Corp.

The seventh-largest U.S. bank will sell 57 of its branches and $4.2 billion in deposits to First Niagara Financial Group Inc FNFG.O for a deposit premium of 1.3 percent, or $54 million.

Pittsburgh-based PNC will also sell one branch to Emclaire Financial Corp and three branches to Marquette Savings Bank.

In October 2008, PNC had agreed to buy ailing National City in a government-supported $5.6 billion deal to rescue the large Ohio lender and create the No. 5 U.S. bank by deposits.

Shares of First Niagara, which has $6.2 billion in deposits, were trading up more than 14 percent, while PNC shares were down more than 5 percent in afternoon trade.

In a separate statement, Emlenton, Pennsylvania-based Emclaire said it will assume about $90 million in deposits and will pay a 3.4 percent premium. The deal is expected to add to earnings in the fourth quarter of 2009, the company said.

First Niagara said it expects the deal to close in September 2009 and add to earnings by about 20 percent in 2010.

“While the economics (of the deal) are compelling and strong on multiple fronts, there is no question (about) the significant add to liquidity here,” Chief Executive John Koelmel said in a conference call.

In addition to $3.2 billion in cash, First Niagara will also receive about $839 million of performing business and consumer loans, it said in a news release.

The financial services firm will create 50 to 75 new jobs to support the new branch network, it said. The bank will also add an additional 100 to 125 positions in upstate New York.

The company does not require to keep all the 57 branches, the CEO said in the conference call. “Clearly we have got some preliminary ideas on how we can optimally position our footprint,” he said.

Under a separate agreement with PNC Financial and its unit National City, First Niagara has the option of issuing a combination of common stock and debt at closing.

As part of the agreement, the aggregate amount of stock and debt should not exceed $150 million, and the number of common shares should not exceed 6.8 million, the company said.

First Niagara was advised by Goldman Sachs & Co and law firm of Luse Gorman Pomerenk & Schick. PNC Financial was advised by Sandler O’Neill and Partners and law firm Wachtell, Lipton, Rosen & Katz.

PNC shares were down $1.88 at $31.93 on the New York Stock Exchange while First Niagara shares rose $1.51 at $12.70 in afternoon trade on the Nasdaq. (Reporting by Sweta Singh in Bangalore; Editing by Jarshad Kakkrakandy, Dinesh Nair)

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