Net income fell to $546 million, or 98 cents a share, from $912 million, or $1.67, a year earlier, the Pittsburgh-based bank said today in a statement. Per-share earnings excluding one-time items other than the mortgage costs were $1.20, two cents less than the $1.22 average estimate of 22 analysts surveyed by Bloomberg.
PNC, led by Chief Executive Officer Jim Rohr, 63, said earnings were reduced by a $438 million pretax provision related to the residential-mortgage repurchase demands. The company said last month it would boost reserves by $350 million for that purpose. PNC is facing increased claims related to loans sold to government-sponsored enterprises as a result of the National City Corp. acquisition in 2009, the company said.
“While we experienced a few items that reduced our earnings in the short term, we were very pleased with our success in continuing to grow customer relationships and loans resulting in strong revenue,” Rohr said in the statement.
The company said it expects so-called putback demands from government-sponsored entities to increase for loans sold in 2006 through 2008.
PNC, which gained 6.8 percent this year through yesterday in New York trading, fell 1 percent to $60.97 at 9:54 a.m.
Revenue increased 1 percent to $3.62 billion, including a 17 percent climb in net interest income to $2.53 billion.
Revenue percentage gains this year will be in the “high single digits,” Chief Financial Officer Richard Johnson said after the company released first-quarter earnings on April 18.
PNC’s residential-mortgage business posted a loss of $213 million on provisions for the repurchase demands.
“PNC has and expects to experience elevated levels of residential mortgage-loan repurchase demands reflecting a change in behavior and demand patterns of two government-sponsored enterprises, FNMA and FHLMC, primarily related to loans sold in 2006 through 2008 in agency securitizations,” the company said in the statement, referring to Freddie Mac and Fannie Mae.
In addition to the mortgage provision, the company also had a non-cash charge of $85 million, or 16 cents a share, from the redemption of trust-preferred securities.
Integration costs were 6 cents a share, the company said.
PNC paid about $3.47 billion for Royal Bank of Canada’s RBC Bank USA and its related credit-card assets, a transaction that was completed in March. The purchase is expected to add 40 cents to earnings per share for the full year, excluding integration costs, Johnson said in April.
Provisions for credit losses rose to $256 million from $185 million in the first quarter and compared with $280 million a year earlier.
Total loans jumped 20 percent to $180.4 billion, led by commercial lending.
The net interest margin, the difference between what PNC pays on deposits and makes on loans, widened to 4.08 percent from 3.90 percent in the first quarter and 3.93 percent a year earlier.
The bank’s PNC Bank unit agreed last month to pay $90 million to settle a lawsuit accusing it of improperly manipulating customers’ debit-card transactions to generate excess overdraft fees, lawyers for the plaintiffs said.
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