After good Q4, PNC Financial Services Group eyes cost cuts
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PNC Financial Services Group, which saw profits jump in the fourth quarter but slip for the full year amid mortgage and other charges, will keep a sharp eye toward cutting costs this year, CEO James Rohr said Thursday.
The chief of the region's biggest bank also said PNC was waiting for approval from regulators to raise the common stock dividend.
PNC reported fourth-quarter net income of $664 million, or $1.24 per share, up 47 percent from $451 million, or 85 cents, a year earlier. Both periods were impacted by special charges.
Revenue rose 15 percent to $4.07 billion from $3.55 billion.
For the full year, PNC's profit skidded 6 percent to $2.83 billion, or $5.30 per share, down from $3 billion, or $5.64, in 2011. Revenue was $15.51 billion, up 8 percent from $14.33 billion the previous year.
"On balance, this was a good year for PNC," Mr. Rohr told analysts in a conference call, noting that the bank made a major push into southeast markets with the $3.5 billion acquisition of the Royal Bank of Canada's U.S. banking operations last year.
With record low interest rates squeezing profit margins and slow growth in the economy, PNC would continue to focus on cutting expenses, Mr. Rohr said.
"Until interest rates rise or we get 4 or 5 percent economic growth -- neither of which we are projecting -- I think we just have to keep working on expenses and growing customers," he said.
A spokeswoman Thursday declined to say whether any job cuts were planned.
In response to an analyst's question about raising the dividend, Mr. Rohr said PNC had submitted its annual capital plan to regulators.
"We're hopeful we will be able to return some additional capital to shareholders this year," he said, adding that there would be no stock buybacks because the company would be rebuilding cash reserves in the wake of the RBC acquisition.
Last week, PNC disclosed that charges primarily related to its residential mortgage business would reduce fourth-quarter profit by 47 cents per share.
In the fourth quarter of 2011, special charges knocked back profit by 62 cents per share.
Charges in the most recent fourth quarter included the costs of settling complaints by federal regulators about mortgage foreclosure abuses and of setting aside additional reserves to cover residential mortgage repurchase demands from Freddie Mac and Fannie Mae. PNC also boosted reserves in prior quarters.
Those two government-sponsored mortgage buyers have been demanding that lenders repurchase problem mortgages after questioning property values and the accuracy of appraisals. In PNC's case, most of the buybacks are tied to mortgages PNC inherited when it bought Cleveland-based National City Corp. in 2008.
On the plus side, results in the most recent quarter were aided by an after-tax gain of $85 million, or 16 cents per share, on the sale of a portion of PNC's stake in the Visa Inc. credit card network.
"We look forward to a much quieter 2013," Mr. Rohr said in the conference call.
"Hopefully we don't have these same mortgage issues in 2013. We can just grow customers and grow income and reduce expenses."
PNC shares rose $2.23, or 3.7 percent, Thursday to close at $62.01.
First Published January 18, 2013 12:07 am