The housing and credit problems roiling markets worldwide will drop PNC's fourth-quarter results below Wall Street expectations, Pittsburgh's largest bank warned yesterday.

The disclosure sent its shares tumbling 3.5 percent, to $68.25.

A local analyst said the surprise announcement -- it was only a month ago that PNC Financial Services Group assured investors that its estimates were on track -- should not damage the reputation of Chief Executive Officer James Rohr, who worked hard to bring PNC back from accounting problems and regulatory scrutiny earlier this decade.

"I don't think it affects [Mr. Rohr's] credibility," said Malcolm Polley, president and chief investment officer of Stewart Capital Advisors LLC, an investment management subsidiary of Indiana-based S&T Bank. "PNC won't be the only one" to revise earnings targets -- in fact, both Bank of America and Wachovia Corp. also warned yesterday of disappointing fourth-quarter results.

But analyst Dick Bove of Punk, Ziegel & Co. said the announcement "really raised credibility issues about management's control of its organization ... they said they wouldn't do this and they did it."

"I find the whole thing off-putting and upsetting."

With PNC, analysts were looking for profits of $1.39 per share, but PNC's earnings are now expected to fall within a range of $1 to $1.15 per share, excluding unusual items.

PNC attributed the revised expectations to a drop in the value of a $1.5 billion commercial mortgage loan portfolio it is holding for sale and lower trading income due to "general market liquidity pressures," according to a filing with the Securities and Exchange Commission.

The valuation change is an accounting maneuver, said S&T's Mr. Polley. PNC, because of recent regulatory changes, now has to count high-credit quality mortgages as "impaired" because the larger subprime crunch is lowering values nationwide, Mr. Polley said. But Mr. Bove said the valuation drop is an indication that credit quality of PNC's mortgages may have been "mislabeled," and that PNC is now betting that the value of the mortgage securities will go up in price by the time they are sold.

"Investors are not gambling when they put money into a bank and a bank shouldn't be gambling either," he said. "That is not the way you should run a company. You should not gamble with billions of dollars."

The bank also raised its provision for credit losses by $45 million, citing the company's residential real estate development exposure in places such as Maryland and northern Virginia. But "asset quality remains relatively strong given the existing credit environment," the bank said in its filing.

Mr. Rohr discussed the fourth-quarter adjustment at an investors conference yesterday in New York. A month ago, he told a similar group in New York that PNC was still within the expected earnings range. "Today," he said, "that is not the case."

The company's ratio of nonperforming loans is still well below the industry average, he said, and housing values in Maryland, a new market for PNC, are not declining as fast as other parts of the country. Plus, demand should pick up as 15,000 families move into the Baltimore area in the next two years because of a military relocation.

"Nothing like the federal government to keep the region going," Mr. Rohr said.