Regional-bank stocks are hot, and this PNC purchase suggests the rally can continue

By Steve Gelsi

Pittsburgh-based PNC is making its largest acquisition in four years with its purchase of FirstBank amid a surge in tie-up talk among banks

PNC's buyout of FirstBank is the latest in the wave of bank mergers that Wall Street is betting on.

PNC Financial Services Group Inc.'s deal to acquire Colorado-based FirstBank for $4.1 billion marks its largest takeover in four years and is the latest example of why Wall Street is expecting a surge in financial-firm tie-ups.

Since mergers often result in higher share prices for the acquired company, an anticipated rise in dealmaking among banks has been one reason for a recent surge in regional-bank stocks.

The SPDR S&P Regional Banking ETF KRE has run up 12.2% over the past three months as of early Tuesday, while the Financial Select Sector SPDR ETF XLF has gained 4.4% and the S&P 500 index SPX has advanced 8.2%.

Thomas Collins, senior partner and lead of West Monroe's commercial banking practice, said he's seeing more banks at the merger table than a year ago.

"Banks need to achieve scale," he said. "There's been a clear signal from the current [Trump] administration that they'll be less stringent on the review process for mergers. Most banks would view this environment as more favorable for mergers."

Read: Regional-bank stocks are catching up to larger rivals. How to play the sector from here.

Along with a more permissive regulatory environment, the interest in bank stocks has also been fueled by certainty around interest rates and commercial real-estate prices compared with a year or two ago, he said.

The SPR Regional Banking ETF (black line) has been outperforming the larger-cap Financial Select Sector SPDR Fund (blue) and the S&P 500 (red).

Against this backdrop, PNC (PNC) said Monday it'll buy FirstBank, based in Lakewood, Colo., to grow its presence in Arizona and Colorado, as part of an overall strategy "to scale its franchise through organic growth and strategic acquisition."

With 95 branches in the growth markets of Arizona and Colorado, privately owned FirstBank ranks as the largest independent bank in Colorado, and its business will immediately add to PNC's earnings, the companies said.

"It helps [PNC] fill in some markets where they want to have a major presence," West Monroe's Collins said. "The bank will likely continue to grow organically and inorganically because it has aspirations to be one of the top national banking powerhouses."

Bank mergers are showing signs of picking up steam again.

The deal comes on the heels of Synovus Financial SNV (SNV) and Pinnacle Financial Partners (PNFP) agreeing to merge in late July in an all-stock deal valued at $8.6 billion.

Jefferies analyst David Chiaverini soon after that merger suggested the Synovus-Pinnacle deal could mark the beginning of "a new wave of bank consolidation" unlocking value for investors.

There is some concern that PNC's rush to be part of that wave may have led it to pay a "Rocky Mountain high" price for FirstBank, Truist's John McDonald said.

"That said, the deal is small for PNC (about 5% of assets), will be modestly accretive to earnings per share and seems unlikely to disrupt its core business momentum, existing capital return plans or ability to do additional M&A," McDonald wrote in a research note.

The acquisition was PNC's largest since 2021, when it paid $11.6 billion for BBVA USA Bancshares, which added 637 branches in Alabama, Texas, California, Arizona, Colorado, New Mexico and Florida to the PNC portfolio.

A PNC spokesperson said the bank is "always open" to merger opportunities as it pursues a goal of becoming "the next truly coast-[to]-coast national bank."

The acquisition of FirstBank was the "right deal, right time," said a PNC spokesperson in an emailed statement to MarketWatch. "It's a strength-to-strength purchase, accelerating our strategy in Colorado and Arizona by 10 years."

-Steve Gelsi

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09-09-25 1524ET