Cleveland-based National City Corp., the second-biggest consumer bank in Pittsburgh behind PNC Financial Services Group, bolstered its position yesterday as one of the nation's largest financial institutions, agreeing to gobble up Cincinnati's Provident Financial Group for roughly $2.1 billion in stock and satisfying a decades-old hunger to expand into Ohio's third-largest city.
Provident, with $17 billion in assets vs. National City's $114 billion, is the second-biggest player in Cincinnati, behind Fifth Third Bancorp.
"This is a logical and desirable fill-in to our franchise," Chief Executive Officer David Daberko said in a conference call announcing the deal. "We've been trying to find an attractive entry into the Cincinnati market for 35 years."
Cincinnati was the only major market in National City's six-state Midwestern footprint in which it didn't have a presence, he said.
The acquisition of Provident, which is expected to close by the end of the second quarter, would give National City a clear No. 1 share in its home state of Ohio, up from No. 3, and vault it ahead of SunTrust Banks in Atlanta to become the nation's eighth-largest bank, up from 10th, according to SNL Financial.
Banking consultant Arnie Danielson viewed the deal as a "significant merger" because it helps National City break further away from the pack of super-regional banks -- such as $75 billion-asset PNC, Fifth Third, KeyCorp, SunTrust and BB&T Corp. -- that are considered ripe for takeover by the nation's biggest banks.
"Now National City looks like a stayer rather than a seller," said Danielson, of Rockville, Md.-based Danielson Associates. "They don't see themselves as a target. This move will get them a little respect."
Provident, which has 65 branches in southwestern Ohio and northern Kentucky, has been struggling in recent years, hampered by bad loans. Daberko said yesterday that he was "satisfied" that those credit quality issues had been resolved.
Meanwhile, banking rivals in Cincinnati will face stiffer competition with the entrance of the much larger and stronger National City, Danielson said.
Cincinnati market leader Fifth Third holds a 32.8 percent share of deposits in Cincinnati's Hamilton County, followed by Provident Bank's 27 percent and U.S. Bancorp's 21.3 percent. PNC is a distant fourth with 5.1 percent.
The deal for Provident follows National City's announcement in November that it was entering St. Louis with the acquisition of the $2.5 billion-asset Allegiant Bancorp for $475 million in cash. In December, National City also unveiled a major push into Chicago, announcing plans to more than double its 31 branches in the region by the end of 2005.
Including Provident, "We will now have three meaningful growth initiatives launched," Daberko said. He also said, in response to a question, that his company's acquisition appetite had been sated -- for now. "From a practical standpoint, [all the activity of late] will pretty much fill our hand for the immediate future.''
Under terms of the deal, Provident shareholders are to receive 1.135 shares of National City stock for each share they hold in a tax-free exchange. That's equal to $40.17 a share based on National City's closing price Friday and a 15 percent premium over Provident's closing price of $34.83.
Shares of National City fell 83 cents, or 2 percent yesterday, to close at $34.56, still near its 52-week high. Provident shares jumped $3.87, or 11 percent, to close at $38.70.
First Published: February 18, 2004, 5:00 a.m.