Feb. 3 (Bloomberg) -- PNC Financial Services Group Inc. fell 7.2 percent in New York trading after the bank posted a fourth- quarter loss on costs to integrate National City Corp. and build bad-debt provisions. The company plans to cut 5,800 jobs, or almost 10 percent of its workforce, by 2011.

The loss was $248 million, or 77 cents a share, compared with profit of $178 million, or 52 cents, in the same period a year earlier, Pittsburgh-based PNC said today in a statement. Profit excluding acquisition costs was 32 cents a share, less than half analysts’ average estimate in a survey by Bloomberg.

“Our fourth-quarter adjusted earnings were below our expectations as a rapidly weakening economy resulted in increased provisions and impairments,” Chief Financial Officer Richard Johnson said on a conference call today. The U.S. economy will probably “remain in a severe recession with unemployment well in excess of 8 percent” through 2009, Johnson said.

Chief Executive Officer Jim Rohr is trying to maintain PNC’s profitability after acquiring National City in January. The Cleveland-based bank, which ranked among the top 10 subprime lenders in 2006, had to sell itself after racking up $4.3 billion in losses. PNC said Jan. 21 it expected a fourth-quarter net loss, its first since 2001, on costs tied to the acquisition.

The bank, which has dropped 39 percent this year, fell $2.33 to $29.85 at 4:06 p.m. in New York Stock Exchange composite trading, after reaching $26.50.

Rohr said the job cuts included 4,000 National City announced in October and 500 tied to planned branch divestitures. A “substantial number” of jobs will be reduced through attrition, he said.

TARP Money

PNC, which sidestepped some of the worst fallout from the credit crunch prior to announcing the National City acquisition, agreed to sell $7.6 billion in preferred shares to the U.S. Treasury’s Troubled Asset Relief Program in October.

Tangible common equity, a measure of a bank’s ability to absorb sudden shocks, was 2.8 percent at the end of last year, dropping from 4.7 percent at the end of 2007. Rohr said the bank was “very well capitalized” and that the tangible ratio was “more than adequate.”

PNC would rather “grow earnings” to increase capital than access the capital markets “at this time,” Johnson said.

PNC said integration costs for National City, including a provision for credit losses and acquisitions, were $422 million. The bank set aside $990 million to cover bad debts in the fourth quarter, including a $504 million provision for credit losses tied to National City, compared with a reserve of $188 million in the same period a year earlier.

U.S. Economy

The lender forecast a full-year 2009 provision of about $3 billion “with the outcome largely dependent on the strength or weakness of the U.S. economy,” Johnson said.

The bank said debt it doesn’t expect to be repaid totaled $207 million, compared with $83 million in the same period a year earlier. Assets no longer collecting interest payments rose to $2.2 billion from $495 million in the fourth-quarter of 2007.

PNC said the increase in charge-offs came from commercial and commercial real-estate loans.

The bank on Jan. 21 said it planned a provision of $450 million to $500 million to cover credit losses and market-related impairments, not including National City’s provisions. PNC also said it didn’t expect to issue new common shares or ask for a second round of help from the U.S. Treasury.

PNC in December became the top holder of BlackRock Inc.’s common shares after Merrill Lynch & Co., the brokerage that sold itself to Bank of America Corp., reduced its voting stake. PNC collected $207 million from its 37 percent stake in BlackRock, the largest publicly traded U.S. money manager, for all of 2008.

To contact the reporter on this story: Linda Shen in New York at lshen21@bloomberg.net

Last Updated: February 3, 2009 16:07 EST