PNC Financial Services Group Inc., the lender that bought National City Corp., was downgraded by Standard & Poor's on the prospect of losses tied to the deal, Bloomberg reported.
The cut to A from A+ reflects "the ongoing deterioration in the mortgage and housing sectors, in which National City has considerable stakes," the ratings firm said today in a statement on Pittsburgh-based PNC.
PNC expects about $20 billion in cumulative losses from loans in National City's portfolio, the lender said in October when it announced the acquisition. The purchase, completed last week as PNC sold $7.6 billion in preferred shares to the U.S. Treasury, transformed PNC into the fifth-largest bank in the country by deposits.
The deal increases PNC's risk of borrower defaults in "the weaker banking markets in the Midwest and Florida," S&P said. "We expect continued challenges in 2009 in terms of asset quality and provisioning, whereas lower economic activity will likely reduce loan volumes.
National City, ranked among the top 10 originators of subprime loans in 2006, was forced into a sale after racking up more than $4 billion in losses, and its stock plunged almost 90 percent last year. PNC's $5.2 billion acquisition gave PNC more than 2,700 locations in 12 states, the bank said when the deal was announced.
PNC on Dec. 11 agreed to sell 61 National City branches in western Pennsylvania to win regulatory approval of the acquisition, and the deal was completed Dec. 31. PNC spokesman Fred Solomon said the lender had no immediate comment on the downgrade.
PNC declined 24 percent in the past year in New York Stock Exchange composite trading. The lender slipped 33 cents to $48.31 today in regular trading before the downgrade.
