UPDATE 3-PNC closer to TARP payment after $2.3 bln sale

* BNY Mellon to raise $800 mln in stock

* PNC could use proceeds to repay TARP

* BNY Mellon, PNC shares each down 1 pct
(Changes headline, recasts lead, adds byline, detail from PNC
statement, analyst comments, updates share prices to market

By Elinor Comlay

NEW YORK, Feb 2 (BestGrowthStock) – PNC Financial Services Group
(PNC.N: ) said on Tuesday it will sell its investment servicing
unit to Bank of New York Mellon for $2.31 billion, giving the
regional bank cash it could use to pay back its government

PNC has said that it wants to repay the $7.6 billion it
borrowed under the Troubled Asset Relief Program (TARP) to help
fund its 2008 acquisition of National City Corp.

“The capital generated from this transaction will position
PNC with further flexibility,” said PNC Chief Executive James
Rohr in a statement.

Banks such as Wells Fargo & Co (WFC.N: ), Bank of America
Corp (BAC.N: ) and Citigroup Inc (C.N: ) that recently repaid TARP
were required to raise capital equivalent to about 50 percent
of their outstanding taxpayer funds, analyst Moshe Orenbuch at
Credit Suisse noted in a report.

PNC could need to generate as much as $1 billion to $1.5
billion of capital either through asset sales or selling stock
before it can repay its TARP funs, Orenbuch said.

PNC expects to report an after-tax gain of about $500
million when the deal closes. The bank’s Tier 1 common capital
— a measure of capital strength — would increase by about
$1.6 billion after the deal and related release of capital tied
to goodwill and other intangible assets, according to the


PNC approached BNY Mellon at the end of last year to
discuss selling the business, which provides accounting and
other services to fund managers, Jim Palermo, co-chief
executive of BNY Mellon Asset Servicing said.

For BNY Mellon, the unit will add $855 billion in assets
under administration and increase its position in fund
accounting and administration, among other businesses. The deal
also gives BNY Mellon access to hedge fund and mutual fund
clients it does not already cover.

New York-based BNY Mellon, which has $22.3 trillion in
assets under custody and administration, will have the No. 2
position in fund accounting and administration after the deal,
it said.

Large players usually have an advantage over smaller ones
in processing businesses, because of the significant technology
spending involved. Smaller players do not typically have the
resources to spend as much on technology, and stand to gain
less profit from there investment.

“It further adds a high proportion of fee-based revenues to
our business which is an important part of our strategy,” said
Palermo. Adding fee-based revenues makes the company less
reliant on more volatile revenue from capital markets, he

BNY Mellon plans to sell about $800 million in stock as
part of the deal, which is expected to close in the third

PNC’s Global Investment Servicing unit is more than 30
years old. Based in Wilmington, Delaware, the unit employs
about 4,500 people, BNY Mellon said. It has become the largest
service provider to the U.S. mutual fund industry.

Shares in BNY Mellon were down almost 1 percent at $29.35
on Tuesday. Shares in PNC were also down just under 1 percent
at $55.35.

Stock Basics

(Reporting by Elinor Comlay; Editing by Lisa Von Ahn and Derek

UPDATE 3-PNC closer to TARP payment after $2.3 bln sale