Adding to the ongoing unemployment concerns, PNC Financial Services Group Inc. (PNC) intends to lay off 621 workers in North Carolina, as part of its acquisition of RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada (RY), according to a state filing on Friday. The company will start trimming its workforce from March 2012.
Precisely, out of the total, 425 jobs cut will take place in Rocky Mount, previous headquarters location of Centura Banks Inc., which was purchased by Royal Bank of Canada to form RBC Bank. Moreover, the remaining 196 jobs will be reduced in Raleigh.
However, PNC Financial announced that the affected workers will be provided with severance payments. After the completion of deal, the company anticipates to bring back some of its severed workers including corporate bankers and asset managers.
Last month, PNC Financial received an approval from the Federal Reserve to acquire RBC Bank (USA). The approval takes PNC Financial a step closer to the completion of the deal, which is slated to close in the first quarter of this year.
In June 2011, PNC Financial announced its plan to purchase RBC Bank (USA) for $3.45 billion. The acquisition would help PNC Financial to expand its footprint in the Southeast markets while making PNC Financial the fifth among the U.S. banks, with 2,870 branches. With its operational competencies, the company anticipates reduction of expenses by $230 million annually of RBC Bank’s (USA) costs.
Moreover, PNC Financial expects the acquisition to be immediately accretive to earnings (excluding integration costs) upon closing.
BofA also intends to retrench 20% of the managing directors across its Asia investment banking division in order to slash costs, according to Reuters.
Notably, PNC Financial is not the only institution, who is leaving so many jobless. Earlier this year, some of the U.S. banks, such as Citigroup Inc. (C), Bank of America Corp. (BAC), Morgan Stanley (MS), Wells Fargo & Company (WFC) and Goldman Sachs Group Inc. (GS) revealed their plans to reduce hundreds of jobs.
After witnessing a similar trend at many other mega banks along with the Eurozone crisis, the layoff announcement does not come as a surprise. Amid the market instability and weakening revenue sources, the company came to this decision of reducing costs.
The layoff story has accelerated, spreading panic among the corporate clan. Realistically speaking, until there is an evident revival in revenue generation, a hideous cost-to-income ratio will continue to force more banks to reduce costs through job cuts for maximizing their profits while boosting capital ratios. Now that the industry leaders have taken their ruthless stand, we wonder what are the other job cut schemes the weak performing firms have in store.
PNC Financial currently retains its Zacks #3 Rank, which translates into a short-term ‘Hold rating. Considering the fundamentals, we are maintaining our “Neutral” rating on the stock.
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