PNC 2Q Earnings Down 60% On Government Payments

   DOW JONES NEWSWIRES 
 

PNC Financial Services Group Inc.'s (PNC) second-quarter profit plunged 60% on charges related to government dividends, despite a boost from its National City acquisition.

The regional bank bought troubled Ohio-focused National City for nearly $2 billion as part of the federal government's effort to pair struggling banks with stronger ones. The move catapulted PNC into fifth place nationally in terms of deposits, with more than $190 billion and branches in 13 states.

The bank has been steadily boosting its loan-loss preserves. National City was cripped by bad real-estate loans as it dealt with repeated rumors about its viability before it was sold to PNC. For years, National City was a conservative commercial lender until it made a nationwide push into writing subprime and home-equity loans.

PNC, which has a large presence in New Jersey and eastern Pennsylvania, posted income of $207 million, or 14 cents a share, down from $517 million, or $1.45 a share, a year earlier.

The latest results included 21 cents a share in preferred-share dividends paid to the U.S. government as part of the Troubled Asset Relief Program as well as 39 cents in integration costs and a special Federal Deposit Insurance Corp. assessment.

Revenue soared 96% to $3.99 billion.

Analysts surveyed by Thomson Reuters expected earnings of 45 cents on revenue of $3.65 billion.

Credit-loss provisions were $1.09 billion, multiple times higher than both the prior quarter and year, primarily due to National City. Net charge-offs rose to 1.9% of average loans from 0.6% and 1%, respectively. Nonperforming loans rose to 2.4% of total loans from 1% and 1.7%.

The bank's Tier 1 common capital ratio, a key measure of financial strength, was 5.3%, down from 5.7% in the prior year and up from 4.9% in the prior quarter.

Total deposits fell 2.2% to $190 billion during the period amid a decline in other time deposits.

The retail-banking segment's profits slumped 26% as revenue more than doubled. Corporate and institutional banking saw profits fall 30% as revenue more than doubled

The bank has chosen not to repay the TARP investment, even though it likely could do so immediately. Chief Executive James Rohr was asked by an analyst in May about its plans for paying back the $7.6 billion in funding it got from the program, and he said the company would do so as soon as possible but in a shareholder-friendly manner. The comment suggested shareholders are unlikely to face the heavy dilution other bank investors have faced recently, since many firms repaying TARP have raised the necessary cash in part by issuing new shares.

PNC's shares closed Wednesday at $37.41 and haven't traded premarket.

-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; [e-mail]