PNC profits for second quarter drop 40 percent

By Jamison Cocklin


Pittsburgh-based PNC Bank reported a 40 percent decline in second-quarter profits Wednesday, when it released its quarterly earnings report.

The bank revealed that it earned a profit of $546 million during the second quarter, or 98 cents per share, compared with $912 million, or $1.67, a year earlier. However, this year’s earnings were reduced by $403 million on an after-tax basis, or 54 cents per share.

The reduction largely stems from a $284 million cost related to residential mortgage repurchase demands. Although the bank finished well below predictions from analysts, who forecast for adjusted earnings of around $1.22 per share, the company said last month that it would bump up its reserves by $350 million for the $284 million loss.

PNC continues to confront increased claims related to loans sold to government- sponsored enterprises after it acquired National City Corp. in 2009.

“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,” the company said in a statement, referring to Fannie Mae and Freddie Mac, the government-backed companies that guarantee mortgage-related securities and participate in the secondary mortgage markets by purchasing loans from lenders.

Such demands are expected to increase for loans sold between 2006 and 2008, according to the company’s earnings report.

As a result, PNC’s residential-mortgage business took a loss of $213 million on provisions for the repurchasing demands. Comparable items reduced 2011 second-quarter earnings by only $17 million.

Total revenue was up at PNC from a year earlier, posting a 1 percent gain at $3.62 billion, including $2.52 billion in net interest income, a 17 percent jump from the same quarter last year.

“PNC’s results for the second quarter reflected strong operating performance in a challenging environment,” said James E. Rohr, the company’s chief executive, in a statement after the earnings report. “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.”

Total loans were up 20 percent from a year earlier, driven in part by strong commercial lending, which totaled $104.1 billion. Consumer lending increased by 10 percent thanks to a higher volume of automobile loans, which netted $7 billion for the bank.

PNC has more than 400 branches throughout Ohio. It is the seventh-largest U.S. bank by deposits.

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