Deal expected to bring job losses to Raleigh

Several media report the deal, which probably means big job cuts in Raleigh.

Staff WritersJune 20, 2011 

The sale of Raleigh-based RBC Bank, a company whose headquarters has helped spur the revival of downtown, could be announced as soon as this morning.

Royal Bank of Canada reportedly struck a deal to sell RBC, its struggling U.S. banking business, for $3.45 billion in cash and stock to PNC Financial, a regional bank based in Pittsburgh.

The deal was reported by several major news outlets - including the Wall Street Journal and Bloomberg News - which cited sources familiar with the situation.

Such a deal likely would trigger significant job cuts and would be another blow to Raleigh and its economy. Raleigh already is poised to lose Progress Energy's downtown headquarters when the Fortune 500 utility completes its pending merger with Charlotte-based Duke Energy.

In October 2008, RBC moved its U.S. headquarters to RBC Plaza at Fayetteville and Martin streets. The move signaled Raleigh's shift to something more than a government town.

"We'll have to wait and see what the buyer intends to do with (RBC Bank) - whether it intends to keep Raleigh as a regional headquarters or if it intends to reduce the size of employment here," Raleigh Mayor Charles Meeker said Sunday. "It's too early to say."

RBC Bank officials couldn't be reached for comment Sunday, and PNC spokesman Fred Solomon declined to comment.

The sale of RBC Bank would allow Canada's largest bank to exit a disappointing business that has been a drag on its earnings. At the same time, getting PNC stock as part of the deal would enable Royal Bank to maintain a stake in the U.S. banking industry.

For PNC, acquiring RBC would enable it to jump into the Southeastern banking market in a major way. PNC ranks sixth in deposits among U.S. banks and has 2,500 branches in 15 states and Washington, D.C.

"This is a north-of-the-Mason-Dixon-line bank combining with a south-of-the-Mason-Dixon-line bank," said Tony Plath, a finance professor at UNC-Charlotte. "It's a combination that takes PNC out of its current existing footprint, and that's going to preserve more jobs.

"But let's face reality: There are going to be job losses."

Plath predicted that, in the Triangle, PNC would eliminate 150 to 200 administrative jobs - including all the senior executives and the people who answer to them.

"What I'm really concerned about is the operations center in Rocky Mount," Plath said. "Will they keep that or will they let that go? That's a wild card."

RBC has more than 1,000 employees in Rocky Mount, a holdover from when the bank was headquartered there.

The majority of those employees are involved in functions such as information technology and mortgage processing.

If PNC decides to consolidate those functions in Pennsylvania, "that would decimate Rocky Mount," Plath said.

RBC also has workers in eight Rocky Mount branches.

From a jobs perspective, the PNC deal may work out better than had Winston-Salem-based BB&T won the bid. BB&T reportedly also sought to strike a deal.

"If BB&T had won this deal, the job losses in Raleigh would have been much more substantial because Raleigh is so close to the Triad," Plath said. "They could have eliminated a lot of their redundancies."

In addition, BB&T likely wouldn't have wanted to maintain an operations center in Rocky Mount because it has a similar, but larger, operations center of its own in Wilson.

RBC already has cut costs, including hundreds of jobs, and reshuffled its management in an effort to turn around its business, which like many U.S. banks has suffered from the recession and the slumping real estate market. Last year the bank lost $392.6 million, but it has shown improvement in recent quarters, and CEO Jim Westlake has said he expects it to report a profit later this year.

A sale price of $3.45 billion is at the high end of what analysts thought RBC would fetch in a sale, with estimates from $2 billion to $3.7 billion. Still, it falls short of the $4.6 billion that Royal Bank has plowed into RBC, including its $2.1 billion acquisition of Centura Banks in 2001 plus acquisitions of smaller banks that expanded RBC's footprint across the Southeast.

david.ranii@newsobserver.com or 919-829-4877

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