U.S. Bancorp, PNC Profit Helped by Commercial Lending

U.S. Bancorp (USB) and PNC Financial Services Group Inc., the nation’s largest regional banks, reported second-quarter profit that beat analysts’ estimates as commercial loan growth accelerated and both companies set aside less money to cover losses.

Commercial loans increased 12 percent to $75 billion in the quarter from a year earlier, Minneapolis-based U.S. Bancorp said today in a statement. Pittsburgh-based PNC reported a 9.5 percent increase in commercial lending to $124 billion.

“Total commercial loans and commercial real estate loans were both strong,” U.S. Bancorp Chief Executive Officer Richard Davis, 56, said in the statement. “We expect overall credit quality to remain relatively stable over the next few quarters.”

Commercial and industrial lending among U.S. banks increased $40.2 billion, or 2.38 percent, to $1.73 trillion in the four weeks ended July 2, after rising just 0.2 percent in the prior period, according to Federal Reserve data compiled by Bloomberg. The increase was the biggest since February.

For PNC and U.S. Bancorp, the quarterly growth in commercial lending was pushed by their commercial real estate businesses, said Terry McEvoy, an analyst at Sterne Agee & Leach Inc.

“I think it’s supply and demand finding each other,” McEvoy said in a phone interview. “Banks for a while were cleaning up their commercial real estate portfolio. Once they cleaned it up, they were willing to get back into that market.”

Loss Provisions

U.S. Bancorp’s net income rose to $1.5 billion, or 78 cents a share, from $1.48 billion, or 76 cents, a year earlier, the firm said. The average estimate of 29 analysts surveyed by Bloomberg was 77 cents.

Revenue increased to $5.19 billion from $4.95 billion last year, according to U.S. Bancorp’s statement. Gains included a 6.1 percent increase in credit and debit card revenue, and a 9.5 percent gain in fees from its trust-management business. Mortgage banking revenue decreased 30 percent to $278 million, the bank said.

PNC’s second-quarter net income fell 5.7 percent to $1.05 billion, or $1.85 a share, from $1.12 billion, or $1.98, a year earlier, the bank said in a statement. The average estimate of 28 analysts surveyed by Bloomberg was for adjusted profit of $1.78 a share.

Revenue declined 6.3 percent to $3.81 billion from a year earlier, PNC said. Second-quarter noninterest expenses declined 3.2 percent to $2.33 billion from a year earlier, according to the statement.

PNC set aside $72 million for bad loans, or 54 percent less than a year earlier, while U.S. Bancorp cut its provision 11 percent to $324 million, according to the banks’ statements.

PNC gained 14 percent this year through yesterday, the best performer in the 24-company KBW Bank Index (BKX), which advanced 4.2 percent. U.S. Bancorp shares climbed 7.2 percent through yesterday.

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steven Crabill, Christine Harper

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