PNC Profit Beats Estimates on Gains in Commercial Lending

PNC Financial Services Group Inc., the second-largest U.S. regional bank, posted profit that beat analysts’ estimates as a strengthening U.S. economy bolstered commercial lending and the firm set aside less money to cover losses.

Fourth-quarter net income fell 1.6 percent to $1.06 billion, or $1.84 a share, from $1.07 billion, or $1.87, a year earlier, the Pittsburgh-based lender said today in a statement. The average estimate of 26 analysts surveyed by Bloomberg was $1.73 a share, adjusted for one-time items.

Chief Executive Officer Bill Demchak has relied on fee-generating businesses such as asset management and gains in commercial lending to help boost revenue as record low interest rates squeeze margins and the mortgage market slumps.

“While the near-term revenue environment remains challenging, I like how we are positioned,” Demchak, 52, said in the statement. “We added customers, grew loans and deposits, increased fee income and capital, and reduced expenses.”

Revenue Falls

Revenue fell 3.1 percent to $3.95 billion from a year earlier, topping the $3.8 billion average estimate of 19 analysts surveyed by Bloomberg, while the bank set aside less money to cover losses. Noninterest income rose 2.4 percent to $1.85 billion, helped by a $94 million gain from the sale of the bank’s Washington regional headquarters and $36 million from selling shares of Visa Inc.

Commercial loans climbed 9.6 percent to $128.4 billion in the quarter as total loans increased 4.7 percent. Net interest margin, the difference between what a bank pays for deposits and charges for loans, fell to 2.89 percent from 2.98 percent in the previous quarter, the bank said. Analysts had estimated NIM of 2.91 percent.

Noninterest expenses rose 1 percent to $2.5 billion from a year earlier as the bank increased spending on technology and business infrastructure, PNC said.

The U.S. jobless rate fell last month to the lowest level since June 2008, capping the best year for the labor market since 1999. Commercial and industrial loans at U.S. banks rose at a 9.3 percent annual rate in the fourth quarter, while consumer loans increased 4.1 percent, according to Federal Reserve data.

PNC gained 18 percent in 2014, the second-best performance in the 24-company KBW Bank Index, which rose 7.2 percent.

JPMorgan, the biggest U.S. bank, said Jan. 14 that quarterly profit fell 6.6 percent to $4.93 billion as fixed-income trading revenue declined. Wells Fargo & Co., the most valuable U.S. bank, said net income climbed 1.8 percent to $5.71 billion on improved lending. U.S. Bancorp, the nation’s biggest regional lender, is scheduled to report earnings on Jan. 21.

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