The logo of PNC Bank, a subsidiary of PNC Financial Services Group, is seen above a branch in Washington, U.S. April 30, 2023. REUTERS/Ashraf Fahim/File Photo

By Arasu Kannagi Basil and Nupur Anand

(Reuters) - U.S. bank PNC Financial said on Monday it would buy privately-held FirstBank Holding in a $4.1 billion cash-and-stock deal, adding momentum to a long-predicted wave of dealmaking among regional lenders.

The deal, which is expected to close in early 2026, will bring PNC closer to $600 billion in assets, and narrow its gap with rivals such as U.S. Bancorp.

It will also help PNC to expand in the fast-growing markets of Colorado and Arizona, bolstering its position in the western United States.

Shares of Pittsburgh, Pennsylvania-based PNC fell nearly 1% in morning trading.

PNC CEO Bill Demchak said in June that he expected consolidation in retail banking to boost industry profits.

FirstBank's "deep retail deposit base, unrivaled branch network in Colorado, (and) growing presence in Arizona make it an ideal partner," Demchak said in a statement on Monday.

PNC's branch network in Colorado will more than triple to 120, becoming one of its biggest U.S. markets.

Discussions between the two banks started in the summer, and the transaction will help PNC strengthen its reach beyond its traditional stronghold on the east coast, Alex Overstrom, head of retail banking at PNC, told Reuters.

"We are a top five retail player in the United States," Overstrom said. "Our ambition is to be one of the top, if not the top retail bank in the country. This transaction allows us to do that by increasing our scale and density in certain areas, which is really important in retail banking," Overstrom added.

Talk of potential mergers and acquisitions among Wall Street banks and large regional lenders increased at the start of the second half of the year in a major shift under the Trump administration after regulators under the Biden administration opposed or blocked big deals.

"PNC is prudently taking advantage of the warmer regulatory waters to gain scale in attractive markets via manageably-sized deals," said Evercore ISI analyst John Pancari.

WHAT NOW FOR PNC?

Investors and analysts had been widely anticipating PNC to acquire a bank, although some expressed surprise at the size of the transaction.

"While we aren’t surprised to see PNC re-enter the M&A arena given the current administration’s de-regulatory agenda, our sense is that investors were more hopeful for a larger splash," said Raymond James analyst Michael Rose.

The deal could also rule out PNC as an acquirer for another large bank, Piper Sandler analysts said.

"PNC has been a name associated as a potential buyer for Comerica," the analysts said, but the FirstBank deal could take it out of the running.

Comerica, a regional lender with $78 billion in assets, is being pushed to sell itself by an activist investor. It did not immediately respond to a request seeking comment.

In July, regional lenders Pinnacle Financial Partners and Synovus Financial agreed to combine in an $8.6 billion deal, the biggest U.S. bank acquisition this year.

Under the PNC deal, FirstBank stockholders will get roughly 13.9 million PNC shares and $1.2 billion in cash.

"At 5% of PNC's size, FirstBank won't materially move the needle, but added scale in Colorado and Arizona raises the company's underlying growth profile and likely removes an overhang on the stock," Stephens analyst Terry McEvoy said.

FirstBank, which began offering banking services in 1963, manages $26.8 billion in assets and operates 95 branches.

FirstBank CEO Kevin Classen will become PNC's Colorado regional president and mountain territory executive, which includes Arizona and Utah. Overstrom said that PNC will retain FirstBank client-facing employees.

Wells Fargo advised PNC on the deal, while Morgan Stanley and Goldman Sachs advised FirstBank.

(Reporting by Arasu Kannagi Basil in Bengaluru and Nupur Anand in New York; Editing by Sahal Muhammed, Sriraj kalluvila, Lananh Nguyen and Marguerita Choy)