Cleveland-based National City Corp., the second largest bank in the Indianapolis area, has agreed to sell itself to a Pittsburgh bank in an all-stock deal that values National City at just $2.33 per share.
The $5.6 billion deal with Pittsburgh-based PNC Financial Services Group Inc. will create the nation's fifth-largest bank by deposits and fourth-largest by number of branches.
PNC also will get a $7.7 billion infusion from the federal government under a $750-billion bailout plan.
The combined bank will take the PNC name, the companies said in a statement this morning.
The banks said the merger should save $1.2 billion by eliminating "operational and administrative redundancies" - code for employee layoffs.
National City Corp. said this week it plans to cut 4,000 jobs over the next three years in a bid to save more than $500 million. The bank, which employs about 1,200 in the Indianapolis area, did not say where it will make the cuts.
The bank also extended its losing streak, reporting that it lost $789 million in the third-quarter, its fifth consecutive quarterly loss.
Depositors pulled $1.3 billion from the bank in the most recent quarter, mostly to ensure accounts are fully covered by Federal Deposit Insurance Corp. insurance limits, leaving National City with $83.3 billion in deposits.
Shares in National City were down 30 percent to $1.88, and PNC shares were down about 6 percent to $53.50 in early trading this morning.