Defying trends set by other large financial institutions this week, PNC Financial Services Group Inc. will not try to immediately return its federal bailout money.
PNC Chief Executive Officer Jim Rohr said in an interview with Bloomberg News that the company plans to "pay it back in more of a medium term, over the next couple of years perhaps."
The company received $7.6 billion under the Troubled Asset Relief Program, in return for preferred stock that pays the government an annual dividend of 5 percent for the first five years and 9 percent thereafter.
Since the Treasury Department announced the results of its stress tests earlier this month, a number of large financial firms, including Goldman Sachs Group Inc. and Morgan Stanley, have applied to return the money they received from the government.
The decisions to withdraw from the TARP program have been motivated by concerns over restrictions on executive pay, dividend payments, and a general feeling that keeping the money sent a signal that the institution was fiscally unsound.
In order to do pay back the money, however, Treasury has said that banks must be able to prove they will be strong enough without government aid or debt guarantees. They must also pay accrued dividends. Some firms have announced plans to sell stock in order to meet these requirements.
PNC decided that such an approach "would be punitive to shareholders," Rohr said, though he noted that the company would have to sell $600 million of shares in order to shore up its capital base in response to the stress test results.
In October, PNC spent $5.08 billion to purchase Ohio-based National City Corp. in a deal arranged by federal regulators concerned about the latter's health.
PNC Chief Executive Officer Jim Rohr said in an interview with Bloomberg News that the company plans to "pay it back in more of a medium term, over the next couple of years perhaps."
The company received $7.6 billion under the Troubled Asset Relief Program, in return for preferred stock that pays the government an annual dividend of 5 percent for the first five years and 9 percent thereafter.
Since the Treasury Department announced the results of its stress tests earlier this month, a number of large financial firms, including Goldman Sachs Group Inc. and Morgan Stanley, have applied to return the money they received from the government.
The decisions to withdraw from the TARP program have been motivated by concerns over restrictions on executive pay, dividend payments, and a general feeling that keeping the money sent a signal that the institution was fiscally unsound.
In order to do pay back the money, however, Treasury has said that banks must be able to prove they will be strong enough without government aid or debt guarantees. They must also pay accrued dividends. Some firms have announced plans to sell stock in order to meet these requirements.
PNC decided that such an approach "would be punitive to shareholders," Rohr said, though he noted that the company would have to sell $600 million of shares in order to shore up its capital base in response to the stress test results.
In October, PNC spent $5.08 billion to purchase Ohio-based National City Corp. in a deal arranged by federal regulators concerned about the latter's health.
published May 21, 2009, 0 Comments
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