Royal Bank sells U.S. operations for $3.45 B to PNC Financial Services: report

TORONTO – Royal Bank of Canada has reportedly agreed to sell its money-losing retail banking operations in the United States to PNC Financial Services Group Inc. for $3.45 billion, a move that would finally bring an end to the bank’s foray south of the border.

The deal, first reported Sunday by The Wall Street Journal, is expected to be announced on Monday.

Analysts had estimated the bank’s potential valuation range between US$2.8 billion and US$3.7 billion.

RBC (TSX:RY) operates under the RBC Bank banner in the U.S. with more than 400 branches throughout North Carolina, South Carolina, Virginia, Georgia, Florida and Alabama.

Pittsburgh-based PNC has more than 2,500 branches across 15 states and the District of Columbia.

National Bank Financial analyst Peter Routledge said the deal would be a positive for Canada’s largest bank.

He said Royal Bank has better opportunities for re-investing shareholder capital in its global wealth management and capital markets businesses.

“In both those segments, RY is comfortably profitable and enjoys relative competitive advantage,” Routledge wrote in an email to The Canadian Press.

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“Regardless of the agreed price, the benefits of re-directing both capital and senior management, board time towards more shareholder-friendly growth strategies is an unequivocal positive for the bank.”

RBC chief executive Gordon Nixon recently said the bank was reviewing its U.S. options, including the possibility of selling some assets in the country, which is still embroiled in a housing market crisis amid continuing high unemployment.

Canada’s big banks have had mixed success with their ventures into the world of U.S. retail banking.

TD Bank bet big when it acquired its operations first with a majority interest in Banknorth and then consolidating its ownership in 2007. Since then the U.S. franchise has grown to more than 1,250 branches up and down the East Coast with deals for Commerce Bank in 2008 and South Financial Group in 2010.

And while Bank of Montreal started with a smaller franchise in the Chicago area _ similar to RBC’s investment in the U.S. southeast _ it has since doubled down with its $4-billion purchase of Milwaukee-based bank Marshall & Ilsley Corp.

Scotiabank has focused on the rest of the Americas, including the Caribbean and Latin America.

Royal Bank shares closed up 62 cents at $54.31 on the Toronto Stock Exchange on Friday.

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