Dive Brief:

• PNC is willing to use its roughly $14 billion windfall from the May sale of its stake in BlackRock to pursue a deal that would push its assets past $700 billion, but the bank "will be patient," CEO William Demchak said Tuesday at a virtual conference hosted by Morgan Stanley.
• Demchak said he would hedge toward buying a bank with higher concentrations of commercial and industrial lending and real estate rather than one that relies too much on consumer loans that risk being lost in an economic downturn.
• PNC would gauge deals on their "ability to replace the earnings from BlackRock with the capital generated from BlackRock," Demchak said, adding that an acquisition would likely involve capital and stock.

Dive Insight:

A deal to bolster $445 billion-asset PNC past the $700 billion mark would make the Pittsburgh-based bank the nation's fifth-largest, leapfrogging Truist and U.S. Bank.

"We could cross [$700 billion], but we have to see what the returns are and obviously the price," Demchak said.

The sell-off of the bank's 22.4% stake in BlackRock turned heads in the finance space, Demchak said. "The day we announced [it], it's fascinating how many phone calls I got just to say, 'Hey Bill, how are you doing?'" he said. "I mean it has to be on everybody's mind. What do you do if you're a bank in this COVID environment?"

Buyers may be at an advantage during the pandemic, Demchak said, because banks that are facing higher credit and technology costs may look to sell.

Ideally, an acquisition would allow further geographic expansion but not too heavy of an investment in consumer loans, Demchak said.

"We don't have an inherent bias against consumer, except for the fact that most of the consumer institutions who show up for sale end up having had a weak franchise to begin with and, therefore, would rely on us to have a capacity to fix it," he said. "And that I'm hesitant on, because we are not the expert fixer of a subprime lender in consumer."

Regardless of the ideal scenario, Demchak said there's still a lot of uncertainty as the market begins its recovery from the perceived height of the pandemic.

"This hasn't begun to play out in our economy in terms of what the impacts are and what the opportunity set will be that comes out of it," he said. "We expected, and still expect, there to be some fairly substantial disruption across the financial landscape, and we wanted to be able to take advantage of that from an offensive standpoint as opposed to be playing defense and hoarding capital."

PNC shares are down 21% this year, according to Bloomberg. But the market has rallied since the bank announced its BlackRock sell-off last month.

"Had I known the market was going to rip another 15%, we would have gotten more dollars [had the bank waited to sell the stake]," Demchak said. "But hindsight is always 20/20."