PNC’s $4.1B FirstBank Gambit: Inside the Strategic Push West
Alexzander Gonzalez
Staff Writer
Who is PNC and FirstBank?
PNC Financial services, based out of Pittsburgh, is one of the largest regional banks in the United States. It ranks as the 7th largest bank by asset size in the country, holding more than half a trillion in assets. They have 2,629 branches located primarily in the East coast and Midwest area. FirstBank Is a smaller regional bank based out of Lakewood, Colorado. They hold about 27 billion in assets and rank as 82nd largest bank by asset in the United States. They hold around 95 branches across Colorado and Arizona, they have historically maintained a solid base of deposits, checking and savings accounts from everyday people. These have provided a steady, low-cost source of funding. FirstBank has been expanding in the high-growth markets of Arizona, positioning itself as a competitive player in the western U.S. With a balance of local trust and steady financial performance, the bank’s strength lies in its stability, loyal customer relationships, and its ability to capture growth in rapidly developing regions.
Why Buy FirstBank?
The 4.1-billion-dollar acquisition is part of PNC’s push westward, and the reasons for this move are tied to both geography and competition. PNC have already bought BBVA USA for $11.6 billion in 2020, which has allowed PNC to have a presence in Texas and areas in the Southwest, since this acquisition PNC has gained over 100 billion dollars in assets and sees acquisitions as viable for expansions.
By acquiring FirstBank, PNC will immediately enter a growing western market which they have yet to tap into. Colorado and Arizona are regions with growing population and expanding economies. This strategic move is important to PNC because instead of trying to fight their way into the market they take the position of an already established figure in the market. With this position also comes access to tens of thousands of FirstBank’s customers and a solid deposit base.
Risks of the Merger
As with any major acquisition, PNC faces several risks that could lead to economic turmoil. If FirstBank’s customers are dissatisfied during the transition or are wary of big banks they could elect to move to other competitor regional banks like Bank of Colorado, US Bank, National Bank of Arizona. This would not only lead to devaluation of their investment but would stifle growth making it harder for PNC to achieve their westward push as they envisioned. Regulatory approval, while expected, is never guaranteed, and delays or new conditions from federal regulators could alter the economics of the deal. There is also a macroeconomic risk tied with the Federal Reserve decisions on interest rates, higher rates could lead to the driving factors (tourism, in-migration, real estate) of Arizona and Colorado’s economy to dwindle, leading to fewer profits for PNC.
PNC Strategic Foresight
The PNC-FirstBank acquisition is not the first of its kind in recent history, it is joining a long trend of big banks acquiring smaller banks for the purpose of expansion. For example, PNC’s successful acquisition of BBVA USA (which inspired this acquisition). Bigger banks are trying to grow larger so they can spread costs and compete with fintech companies. For PNC, the deal could help it move closer to becoming a truly national bank with a presence across the country. For customers in Colorado and Arizona, it could also reduce the number of smaller regional community banks in the market. This move shows how important scale and geography are for the survival of regional banks. Being able to buy out their competition is a luxury only big banks have, smaller regional banks are at risk of being priced out of due to the increasing cost. In today’s market, Banks with physical locations are facing higher costs compared to their Fintech counterparts. Hardware upgrades throughout thousands of branches, cybersecurity upgrades, and regulatory compliance cost banks millions of dollars every year, and to support themselves they must gain new customers to bank with them in order to distribute cost among them. Without both scale and the right geographic reach, banks risk being left behind by larger national players or disrupted by fintech companies that operate online without the same physical branch costs.
Contact Alexzander at alexzander.gonzalez@student.shu.edu