Jamie Kelter Davis/Bloomberg
PNC Financial Services Group, which announced a major expansion of its branch network in February, now says it will build double the number of locations it previously planned in an effort to add scale and achieve higher returns.
The super-regional bank will spend another $500 million to build more than 100 branches in Atlanta; Charlotte and Raleigh, North Carolina; Orlando and Tampa, Florida; and Phoenix, and renovate 200 existing locations across the country over the next five years, executives said Friday.
That’s in addition to that of the Pittsburgh-based company previously announced $1 billion plan to open 100 new locations in Austin, Texas; Dallas, Denver, Houston, Miami and San Antonio, and are renovating more than 1,200 others.
PNC wants to build 40 locations in Miami, instead of the five it originally planned, because of “strong success” with the locations it has already opened in that market, a company spokesperson said in an email Friday. Miami is one of the fastest growing cities in the United States.
“As we’ve said many times, scale is more important in banking today than ever before,” PNC Chairman Michael Lyons said Friday at the BancAnalysts of Boston conference. “Our focus is therefore entirely on profitable and responsible growth, and not on shrinking or divesting.”
PNC is the eighth largest banking company in the United States, with assets of $564.9 billion. Its branch network is the fourth largest in the country, with more than 2,200 locations across 29 states.
PNC’s announcement “reinforces the importance of scale in an industry dominated by a handful of existing and a few emerging national players,” Scott Siefers, an analyst at Piper Sandler, wrote in a research note.
Competitor JPMorgan Chase, the nation’s largest bank by assets, has been on a multi-year branch expansion streak and is currently looking to open more than 500 branches and renovate approximately 1,700 existing offices by the end of 2027.
Much of PNC’s recent growth has been due to acquisitions, most recently are Purchase 2021 of the American branch of the Spanish giant Banco Bilbao Vizcaya Argentaria. The acquisition of BBVA USA added offices in seven states: Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas.
How the M&A environment in banking will develop under a second Trump administration remains to be seen. Bankers are hopeful that friendlier regulators will lead to more mergers and acquisitions, including larger deals, which largely stagnated during the Biden administration.
At PNC, the organic growth strategy takes precedence over acquisitions, at least for now, Lyons said.
While organic growth requires expenses and can take longer than mergers and acquisitions, “if done right, it delivers very attractive returns that are much higher” than what banks can achieve through mergers and acquisitions, Lyons said. Second, it gives banks more control, he said.
“We get to choose the employees who work for us, the customers we bring in and the assets we put on our balance sheet,” he said.
Echoing comments PNC Chairman and CEO Bill Demchak made during the company’s third-quarter earnings call, Lyons said “current valuations of appropriate targets” go beyond what PNC believes they are actually worth.
Demchak told analysts during the October earnings call that certain potential M&A targets “just don’t stand out when you look at their balance sheet and the amount of investment we have to put into the franchise, and the time it takes to to do that.” .”
While the company “does not see a logical deal in the near term,” it is not ruling out merger and acquisition opportunities, Lyons said Friday.
“Our commitment to organic growth will not prevent us from making a strategic acquisition at an attractive price if one arises,” said Lyons. “We’re just not going to sit around and wait for that to happen.”