PNC says it has Fed approval to increase dividend

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PNC Financial Services said today the Federal Reserve has approved its plan to increase its quarterly dividend. But the region's largest bank declined to say how much of an increase there will be.

The bank's board will vote on the dividend rate at its next meeting, scheduled for April 4.

PNC slashed its 66-cent quarterly dividend to 10 cents early in 2009 to conserve cash and bolster its capital while the economy was mired in the Great Recession.

Since then, its ability to increase the dividend has been limited by the Federal Reserve, which is concerned about what would happen to the nation's 18 largest banks if the economy experienced a similar collapse.

The central bank conducts annual stress tests that estimate how sound the banks would be if unemployment topped 12 percent, stock prices dropped more than 50 percent or housing prices declined more than 20 percent -- standards some bankers and Fed critics say are too stringent.

The better a bank performs on the stress test, the more flexibility the Fed gives it regarding increasing its dividend or repurchasing its shares. Both of those things support the price of a bank's stock.

The Federal Reserve announced the results of those tests today and said it has no objections to the capital plans of PNC and 13 other banks. It conditionally approved the plans of Goldman Sachs and JPMorgan Chase and objected to the plans of Ally Financial and BB&T Corporation.

After passing the Fed's stress test last year, PNC announced a 14 percent dividend increase in April, raising the quarterly payout to 40 cents from 35 cents.

Chairman and CEO James E. Rohr told analysts in January that PNC will not be repurchasing shares this year because the company was rebuilding cash reserves following the $3.5 billion acquisition of Royal Bank of Canada's U.S. banking operations last year.

Separately, PNC disclosed today that Mr. Rohr's compensation fell 46 percent last year to $8.9 million. His pay package included a $1.2 million salary and stock awards valued at $4.9 million.

The dividend increase and compensation figures were disclosed after the market closed. PNC shares closed today at $66.25, up 32 cents. They are up 14 percent this year.

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Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.


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