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US bail-out cash buys rival bank | US bail-out cash buys rival bank |
(40 minutes later) | |
A US bank has become the first to use some of the $700bn (£440bn) government bank bail-out to purchase a rival. | |
PNC Financial Services Group is buying National City for $5.6bn - making PNC the US's fifth largest bank by deposits with the fourth most branches. | PNC Financial Services Group is buying National City for $5.6bn - making PNC the US's fifth largest bank by deposits with the fourth most branches. |
Cleveland-based National City needed to be rescued after being heavily weighed down by bad mortgage debt. | Cleveland-based National City needed to be rescued after being heavily weighed down by bad mortgage debt. |
As part of the bail-out, the US Treasury aims to buy stakes in banks in return for capital. | As part of the bail-out, the US Treasury aims to buy stakes in banks in return for capital. |
And while recipients can use some of the investment for acquisitions, the aim of the controversial $700bn move was also to free up lending. | And while recipients can use some of the investment for acquisitions, the aim of the controversial $700bn move was also to free up lending. |
More consolidation expected | |
Banks have been struggling since the middle of 2007 with rising mortgage defaults and a credit crisis that has virtually frozen inter-bank lending and severely restricted lending to consumers. | Banks have been struggling since the middle of 2007 with rising mortgage defaults and a credit crisis that has virtually frozen inter-bank lending and severely restricted lending to consumers. |
The move by Pittsburgh-based PNC to buy National City is expected to be the first of several deals that results in consolidation in the US banking sector. | The move by Pittsburgh-based PNC to buy National City is expected to be the first of several deals that results in consolidation in the US banking sector. |
"PNC now becomes a major force in retail [banking]," said Bart Narter, of consulting firm Celent. "It just doubled in size for not a lot of money." | "PNC now becomes a major force in retail [banking]," said Bart Narter, of consulting firm Celent. "It just doubled in size for not a lot of money." |
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