PNC doubles quarterly profit

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PNC Financial Services Group doubled its second-quarter profits over last year, the bank announced before markets opened Wednesday morning.

Pittsburgh's largest bank reported net income for the three-month period ending June 30 came in at $1.07 billion, or $1.99 per share, compared with last year's $526 million, or 98 cents per share. Faulty mortgages and foreclosures trimmed about $284 million, or 48 cents per share, from last year's second-quarter profits.

Total revenue this quarter came in at $4.06 billion, up 12 percent from $3.62 billion a year ago.

"We think it was an excellent quarter, even without counting some of the select items, and while we're optimistic about the opportunities in the remainder of the year ... clearly this remains a challenging and competitive market," said PNC CEO William Demchak, who took over when James Rohr stepped down in April after 13 years at the company's helm.

PNC shares dropped to $73.55 Wednesday, losing 95 cents over Tuesday's closing price.

Mr. Demchak told Wall Street analysts on a conference call Wednesday morning that the bank has seen some notable results stemming from its recent retail activities, including the planned elimination of PNC's free checking option.

Following the bank's announcement last month that it will begin charging fees for all checking accounts starting in June 2014, Mr. Demchak said fewer existing customers left than expected. He said 55,000 new households joined PNC and average loans grew by about $300 million this quarter.

PNC closed 78 branches in the second quarter, which Mr. Demchak said is another step on the way to closing a total of 200 this year. Last quarter, the bank shuttered 30 branches.

Mr. Demchak cited markets in the southeastern United States as areas for future growth for PNC, which bought the U.S. subsidiary of Royal Bank of Canada in 2012. RBC was based out of Raleigh, N.C. and operated branches in North Carolina, Florida, Alabama, Georgia, Virginia and South Carolina.

"We think of the Southeast as -- we want to turn that into the next Philadelphia or Cleveland or big markets," he said. "This isn't a one- or two- or a three-year game. It's going to be long-term game where we are in those markets and turn those markets into markets that behave like our legacy markets, which are materially more productive today than what we see in the South."

To date this year, Mr. Demchak said 20 percent of new corporate client wins have come from the Southeast markets. In response to analyst questions, PNC CFO Richard Johnson said the RBC acquisition contributed to the results in Southeast markets, but was not a driving factor.

Analysts also asked whether the bank expects to see hits from being required to do any future mortgage repurchases, which cost the bank close to $300 million a year ago. Mr. Johnson said government-sponsored mortgage buyers Fannie Mae and Freddie Mac reviewed about 18,000 of PNC's files since November, but he added that he hopes the reviews are done.

businessnews

Daniel Sisgoreo: dsisgoreo@post-gazette.com, 412-263-1410 or on Twitter @DanielSisgoreo.


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