The most striking thing about this year’s winner of the US best super-regional investment bank award is that PNC Financial Services Group prides itself on not really having an investment bank.
Its chief executive Bill Demchak and corporate and institutional banking head Mike Lyons both spent years on the Wall Street treadmill. They were determined that at PNC the business would have a different focus.
“What we have tried to do is not build an investment banking business in the traditional sense, but instead we work with great companies with a wide range of financial service needs and assemble world-class products that help them achieve their financial objectives,” says Lyons.
That might include sourcing growth capital, facilitating employee benefit payments, collecting receivables or advising on generational transfers of ownership. Treasury management is also critical. But key to it all is a focus on advice.
PNC’s is one of the biggest super-regional franchises. In the awards period, the bank’s non-interest income from capital markets and advisory activities was $1.3 billion, more than its leading super-regional competitors.
The biggest of PNC’s investment banking businesses is Harris Williams, an advisory boutique that it bought in 2005. What it brought was expertise in covering private equity clients, but what it was lacking was the national reach to get business from across the country.
PNC was able to give it just that, bolting on a team that could call on any of the bank’s 20,000 mid-market corporate customers across the US.
In the period under review, the bank advised US Infrastructure Corp when owner Partners Group was selling a 50% stake to Kohlberg & Co for $2 billion in November 2022. Another where the deal terms were disclosed (rare for Harris Williams transactions) was advising Germany’s PharmaLex, owned by Auctus Capital Partners, on its $1.3 billion acquisition by AmerisourceBergen.
The bank’s presence in equity capital markets follows a similar model to its approach to M&A. PNC isn’t highly ranked in the league tables – it was bookrunner on only a handful of transactions in the period. Instead, it puts its emphasis on advisory. It bought a specialist franchise in 2014 called Solebury Capital that shepherds issuers through the issuance process. (Lyons says one client likes to tell him that the only certainties in life are death and taxes – and Solebury on IPOs.)
Our model is largely advisory and tends to perform well on a relative basis in challenging times like these
Mike Lyons
PNC’s debt capital markets business is the piece that looks most like its peers, although it prefers to focus on high-grade and municipal business, along with a big asset-backed franchise.
Lyons measures the bank’s development through its active joint bookrunner mandates, from just four in 2016 to 50 in 2021 and 31 in 2023 to the end of May.
If PNC was missing something, it was coverage of financial institutions, the area that Harris Williams didn’t bring. The 2019 acquisition of financial institutions boutique Ambassador Financial Group added that.
And the portfolio is still building. In April 2023, Harris Williams announced that it was to merge with Sixpoint Partners, a private capital advisory boutique that has expertise in continuation funds.
Given the turbulence of the awards period, what Lyons likes is as much about what PNC doesn’t do as what it does. One thing it doesn’t do for financial sponsors is classic leveraged finance, so it took no losses there, for example.
“Our model is largely advisory and tends to perform well on a relative basis in challenging times like these,” he says. “As markets shifted, our clients wanted to hear from us more than ever. On top of that, we didn’t have any hung loan deals, we didn’t have any material trading risk and we had some of our best results ever in FX and rate derivatives.”
Just don’t call it an investment bank.
