MutualFundWire.com: Should PNC Break Up With BlackRock?

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Thursday, June 13, 2013

Should PNC Break Up With BlackRock?

PNC Financial Services Group will have to make a decision on whether or not to sell or hold its 21 percent stake in BlackRock [profile], writes Bloomberg.

If PNC sells its stock, it could return billion in capital to investors and bolster its share price. The market value of PNC's stake in Black Rock is $9.46 billion. The investment amounts to $5.6 billion on its balance sheet.

If PNC keeps its current position, however, it will continue to have a steady earnings stream . That may come in handy when tepid loan growth and low interest rates are squeezing its margins.

Keith Murray, an analyst at Nomura Holdings said the buyback potential is limited if PNC sold the stake:

The after-tax gain would be about $2.6 billion as of June 6, according to the note. Assuming PNC got approval to repurchase stock, that sum would equate to 37 million shares, or “not a great trade-off versus losing 14 percent of earnings per share,” he wrote.