PNC Fourth-Quarter Profit Climbs 46% as Fee Revenue Gains

PNC Financial Services Group Inc. (PNC), the second-largest U.S. regional bank, said fourth-quarter profit rose 46 percent, beating analysts’ estimates, as revenue from fees increased.

Net income climbed to $719 million, or $1.24 a share, from $493 million, or 85 cents, a year earlier, the Pittsburgh-based bank said today in a statement. Excluding the cost of increased mortgage putback reserves and other one-time items, earnings per share were $1.71, compared with the $1.48 average estimate of 22 analysts surveyed by Bloomberg. Full-year profit declined 2.3 percent to $3 billion, or $5.30 a share.

Lenders including PNC and U.S. Bancorp, the nation’s largest regional bank, are boosting provisions for mortgage repurchases as government-sponsored enterprises Fannie Mae and Freddie Mac expand scrutiny of loans. U.S. regulators struck a deal with 10 mortgage servicers last week in which lenders must provide $5.2 billion in mortgage assistance and $3.3 billion in direct payments to wronged borrowers.

“Core earnings are moving in a direction to support higher valuations as growth continues into 2013, especially as this foreclosure settlement should begin to streamline future foreclosure activities and enable resources to be reduced in the servicing department,” Marty Mosby, an analyst at Guggenheim Securities LLC, said in a Jan. 9 note.

NIM Narrows

Non-interest income climbed 22 percent to $1.65 billion from a year earlier, driving a 15 percent gain in revenue to $4.07 billion. Fees from PNC’s asset-management, corporate services and residential mortgage banking businesses led the gains.

Asset-management revenue rose 21 percent to $302 million, and corporate services revenue gained 31 percent to $349 million. Revenue from residential mortgage banking advanced 32 percent to $254 million from a year earlier.

Net interest income rose 10 percent to $2.42 billion as average total loans grew 17 percent to $183.2 billion. PNC’s net interest margin, the difference between what a bank pays on deposits and what it charges for loans, narrowed to 3.85 percent from 3.86 percent a year earlier.

The bank set aside $318 million for soured loans, a 67 percent jump from a year earlier. PNC set aside $254 million for residential mortgage repurchases, compared with $36 million in the fourth quarter of 2011.

Cost Cuts

The lender said Jan. 9 it would book one-time fourth- quarter items that would cut earnings by 47 cents per share.

PNC may face investor scrutiny after adjusting its reserves for repurchasing soured loans for the third time in six months, Mosby said in the note. The bank said in November that it was seeing a “trending down” of demands from Fannie Mae and Freddie Mac.

The lender plans to close branches and cut staff in an effort to reduce costs this year, Chief Executive Officer Jim Rohr, 64, said last month. PNC’s goal is to trim expenses by $500 million in 2013, he said.

PNC gained 1 cent to $59.78 at 4 p.m. yesterday in New York. The shares slid 2.4 percent in the past year, compared with a 25 percent advance by the 80-company Standard & Poor’s 500 Financials Index. (S5FINL)

U.S. Bancorp said yesterday that fourth-quarter profit rose 5.2 percent to $1.42 billion, or 72 cents a share, as loan-loss provisions declined. The company said costs related to the mortgage-foreclosure settlement were $80 million, or 3 cents a share. The Minneapolis-based lender added $52 million to its mortgage repurchase reserve, bringing the total to $240 million.

Mortgage banking revenue surged 57 percent in the fourth quarter from a year earlier, U.S. Bancorp said. Mortgage revenue at JPMorgan Chase & Co., the largest U.S. bank by assets, more than doubled to $2.03 billion, the New York-based firm said yesterday.

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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