Wednesday, July 19, 2000
PNC plans to sell mortgage company
Aim is to bolster faster-growing units
By Jeff McKinney
The Cincinnati Enquirer
PNC Financial Service Group Inc., which operates Cincinnati's third-largest home lender, plans to sell its mortgage unit, hoping to invest the money in faster growth areas, such as asset management.
The Pittsburgh-based parent of PNC Bank said it has hired Smith Barney to sell the mortgage company, which collects payments for about $85 billion in home loans and and has a mortgage service portfolio with a market value of about $1.8 billion.
Locally, PNC is the area's third-largest mortgage provider behind Fifth Third Bank and Third Federal Savings. PNC closed almost 1,430 residential mortgages worth $200 million last year.
But Tristate consumers still will be able to obtain mortgages at PNC, which has 47 branches in Greater Cincinnati. If the division's sale occurs, PNC loans would he underwritten and serviced by another provid er.
PNC said its mortgage business is not large enough to operate profitably and compete with rivals such as Chase Manhattan Corp. and Wells Fargo & Co. Those companies have grown to several times PNC's size by acquiring other companies' units.
PNC hopes to benefit from industry consolidation and sell the mortgage company to a larger player. It hopes to shed the business this year, possibly fetching up to $400 million to $500 million, and reinvest that money in its faster-growing businesses.
“Mortgage servicing is an extremely cyclical business, and you really need scale in it,” said Lawrence Cohn, an analyst at Ryan, Beck & Co.
Wells Fargo last month agreed to buy First Union Corp.'s $49 billion mortgage servicing portfolio, making it the largest in that business with a $333 billion portfolio.
Bloomberg News contributed to this story.
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