WASHINGTON, Oct 24: US regional bank PNC, tapping into a Treasury emergency fund, said on Friday it is buying National City in a $5.6 billion deal to create the nation’s fifth largest bank by deposits.

PNC was the first regional bank to announce it had been approved for a partial nationalisation under the Treasury’s new 700-billion-dollar Troubled Asset Relief Programme (TARP).

Last week the Treasury set a November 14 deadline for banks to apply for a massive financial rescue of up to $250 billion in capital in exchange for equity stakes to help restore credit flows.

Nine large banks including Citigroup, JPMorgan Chase and Goldman Sachs earlier this month agreed to give the government equity stakes in exchange for new capital in the programme, the first of its kind since the 1930s Great Depression.

The Pittsburgh, Pennsylvania-based PNC said it will issue to the US Treasury $7.7 billion of preferred stock and related warrants under the TARP.

PNC will acquire struggling National City Corporation, based in Cleveland, Ohio, for $2.23 per share, representing about $5.2 billion, the banks said in a joint statement.

An additional $384 million in cash will be paid to certain warrant holders.

The $5.584bn acquisition is expected to close by year-end, subject to shareholder and regulatory approval, the firms said.

James Rohr, PNC chairman and chief executive, welcomed his bank’s selection for the Treasury’s capital purchase programme of bank shares under the TARP, saying it paved the way for the acquisition.

“We are also gratified that we have been selected to participate in Treasury’s Capital Purchase Programme, which has helped to put this transaction on a very solid footing,” he said in the statement.

“The acquisition of National City will increase our core deposit base to $180 billion, making PNC the fifth-largest US bank by deposits,” he said.

A takeover of troubled National City had been the subject of rumours in recent weeks as its stock was pummelled repeatedly, reducing the bank’s capitalisation to several billion dollars.—AFP