Magazine article American Banker

Why PNC Is Buying Sears Mortgage Corp

Magazine article American Banker

Why PNC Is Buying Sears Mortgage Corp

Article excerpt

James Rohr, president of PNC Bank Corp., led last month's acquisition of Sears Mortgage Group for $328 million. The deal vaults PNC into the top ranks of the nation's mortgage companies. American Banker reporter Christopher Noble recently spoke with him about the deal.

Q.: What are the broad, strategic reasons for the acquisition of Sears Mortgage Group?

ROHR: Strategically, as long as we're in the branch banking business, we're going to be in the mortgage business.

Q.: Why does that follow?

ROHR: Frankly, it's because you have customers coming in every day and asking for mortgages.

Moving from there, the reason is that currently we have 550 branches that are in the business of mortgage origination. And it takes a certain economy of scale to efficiently process the servicing for those mortgages.

By expanding to the point of acquiring Sears Mortgage, it really gives us the size to take advantage of those technological economies of scale.

Q.: Could you give us an example how those economies of scale work?

ROHR: Technologically, you have systems that process thousands and thousands of loans. It would cost you the same amount of money to buy a system to process fewer loans. So you can spread your technological development costs as well as your overhead and operating expenses over a much larger base.

Q.: Why would you make such a giant purchase at what could be considered the top of the mortgage lending market?

ROHR: There's a series of things. It's a strategic business that we've wanted to grow in. It's a fee income business that we think has strong profit margins. It's here to stay, and will be a very profitable contribution to our shareholders for a long period.

Secondly, while it may be the top of the market in terms of refinance volume, we think the price we paid is a very attractive price to our shareholders. …

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