S&P puts PNC on watch, National City on positive watch

Standard & Poor's said it placed its long-term ratings on PNC Financial Services Group Inc. (A+) on CreditWatch negative and the ratings of National City Corp. (A-/A-2) on CreditWatch positive following the announcement that PNC will acquire National City in an essentially all-stock transaction valued at $5.6 billion.

The agency said the CreditWatch negative action on PNC reflects the size of this transaction, which comes amidst the current credit crisis. The transaction also materially increases PNC's exposure to residential mortgage-related loans in some of the weaker banking markets in the Midwest and Florida.

On the positive side, PNC has a solid track record of successfully acquiring and integrating banks, S&P said, and National City provides a degree of potential cost savings.

National City's ratings reflect S&P's concerns regarding the ongoing deterioration in the mortgage and housing sectors, in which the company has considerable stakes. Upon closure of this transaction, the agency expects to raise National City's long-term rating and equalize it with PNC's rating.

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