PNC and BNY Mellon report income gains

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PNC Financial Services Group on Wednesday reported third-quarter profit climbed 10 percent from a year ago as the region's biggest bank held down expenses and set aside less money to cover bad loans.

At the same time, trust and custody giant Bank of New York Mellon said third-quarter earnings surged 34 percent, boosted by a favorable tax ruling.

At PNC, net income was $966 million, up from $876 million in the third quarter last year. Per-share profits rose 9 percent to $1.79 from $1.64.

Revenue skidded 4 percent to $3.92 billion, down from $4.09 billion as net interest income -- essentially profit on loans -- slid 7 percent. Although loan volume grew, interest rate margins continued to fall.

The provision for loan losses was $137 million, down 40 percent from $228 million a year earlier.

"During a time when the [Federal Reserve] data tells us loan demand has slowed across the industry, PNC continued to grow loans in the third quarter," CEO William Demchak said in a conference call with Wall Street analysts.

Even so, big banks including Pittsburgh-based PNC have seen revenues decline on the mortgage banking side as a recent bump up in long-term interest rates curbed demand for refinancings.

In response, PNC eliminated about 7 percent of the workforce in its residential mortgage business this month, chief financial officer Robert Reilly told analysts. The move should save the bank some $24 million annually, he said.

Spokeswoman Marcey Zwiebel on Wednesday declined to say specifically how many people were laid off, but said the cuts involved "dozens" at each of PNC's four large mortgage operations in Pittsburgh; Miamisburg, Ohio; Downers Grove, Ill.; and Jacksonville, Fla. Cuts also were made at some sales offices, she said.

In the conference call, Mr. Demchak warned that even though it appeared Congress would avert a U.S. debt default in the 11th hour, just the threat of a default in recent weeks likely would have lasting consequences for the economy.

"We're still likely to see an impact in the form of a slowdown in broader economic activity as we go into the fourth quarter," Mr. Demchak said.

At BNY Mellon -- which has kept a major presence in Pittsburgh since merging with the old Mellon Financial in 2007 -- third-quarter earnings hit $967 million, or 82 cents per share, up from $720 million, or 61 cents, in the same three months last year.

Excluding a U.S. Tax Court's partial reconsideration of a decision that disallowed certain foreign tax credits, the company had net income of $706 million, or 60 cents per share, slightly ahead of analysts' consensus estimate of 58 cents.

Revenue for the three months ended Sept. 30 rose 3 percent to $3.77 billion from $3.68 billion on the strength of the company's investment management and services business.

Market conditions improved for most of BNY Mellon's businesses, fee income was strong and the company was ahead of its cost-cutting goals, chairman and CEO Gerald Hassell said.

Shares of BNY Mellon slipped 10 cents, or .32 percent, to close Wednesday at $30.75. PNC shares rose $1.34, or 1.85 percent, to close at $73.85.


Patricia Sabatini: or 412-263-3066. First Published October 16, 2013 8:00 PM


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