DOW JONES NEWSWIRES
PNC Financial Services Group Inc.'s (PNC) second-quarter profit
plunged 60% on charges related to government dividends, despite a
boost from its National City acquisition.
The regional bank bought troubled Ohio-focused National City for
nearly $2 billion as part of the federal government's effort to
pair struggling banks with stronger ones. The move catapulted PNC
into fifth place nationally in terms of deposits, with more than
$190 billion and branches in 13 states.
The bank has been steadily boosting its loan-loss preserves.
National City was cripped by bad real-estate loans as it dealt with
repeated rumors about its viability before it was sold to PNC. For
years, National City was a conservative commercial lender until it
made a nationwide push into writing subprime and home-equity
loans.
PNC, which has a large presence in New Jersey and eastern
Pennsylvania, posted income of $207 million, or 14 cents a share,
down from $517 million, or $1.45 a share, a year earlier.
The latest results included 21 cents a share in preferred-share
dividends paid to the U.S. government as part of the Troubled Asset
Relief Program as well as 39 cents in integration costs and a
special Federal Deposit Insurance Corp. assessment.
Revenue soared 96% to $3.99 billion.
Analysts surveyed by Thomson Reuters expected earnings of 45
cents on revenue of $3.65 billion.
Credit-loss provisions were $1.09 billion, multiple times higher
than both the prior quarter and year, primarily due to National
City. Net charge-offs rose to 1.9% of average loans from 0.6% and
1%, respectively. Nonperforming loans rose to 2.4% of total loans
from 1% and 1.7%.
The bank's Tier 1 common capital ratio, a key measure of
financial strength, was 5.3%, down from 5.7% in the prior year and
up from 4.9% in the prior quarter.
Total deposits fell 2.2% to $190 billion during the period amid
a decline in other time deposits.
The retail-banking segment's profits slumped 26% as revenue more
than doubled. Corporate and institutional banking saw profits fall
30% as revenue more than doubled
The bank has chosen not to repay the TARP investment, even
though it likely could do so immediately. Chief Executive James
Rohr was asked by an analyst in May about its plans for paying back
the $7.6 billion in funding it got from the program, and he said
the company would do so as soon as possible but in a
shareholder-friendly manner. The comment suggested shareholders are
unlikely to face the heavy dilution other bank investors have faced
recently, since many firms repaying TARP have raised the necessary
cash in part by issuing new shares.
PNC's shares closed Wednesday at $37.41 and haven't traded
premarket.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com