Two of Pittsburgh's largest financial institutions reported second-quarter earnings today that exceeded Wall Street expectations, with PNC Financial Services Group and Mellon Financial Corp. showing gains of $381 million and $231 million, respectively.
Mellon's earnings were up 12 percent from the same period last year, driven by growth in its money management business. Assets under management surged 18 percent to a record $870 billion. But total expenses grew at a faster rate than total revenues -- a trend that Mellon Chief Executive Officer Robert Kelly wants to reverse.
In fact, Mr. Kelly told analysts this morning in a conference call that he is midway through a strategic review of all Mellon businesses, looking for ways to boost revenues, increase margins and cut expenses. Mellon's board should see the results of the review in October, and Mr. Kelly will present the findings to the financial community on Nov. 13, at an investors meeting in New York.
The CEO told the Post-Gazette in April that the review could mean some cuts in Pittsburgh but it also may result in more jobs here, too. Yesterday, Mr. Kelly said Mellon is looking everywhere -- including the head office Downtown -- for savings. The goal, Mr. Kelly said, is for every Mellon business to show profit margins that equal the company's peers -- a process that might take a year or two to complete.
"It will not happen overnight," he said.
At PNC, the region's largest bank continued its recent run of good news by reporting a 35 percent surge in its second-quarter profit from the same period a year ago -- a result supported by big increases in money management and retail banking. Average loans increased 6 percent and average deposits increased 11 percent -- both due in part to the bank's expansion over the last year into the highly competitive Washington, D.C., market.
In a conference call with analysts, PNC Chief Executive Officer James Rohr said the company continues to look for "shareholder-friendly acquisitions" of other banks, "as they present themselves." But the "pricing is pretty steep still." Mr. Rohr emphasized that he will not overpay simply as a way of increasing in size -- that the deals have to ensure an adequate return for PNC's shareholders. "Someone asked me the other day, 'How big do we want to be?' " he said. "That is absolutely not the question we ask ourselves around here. We ask ourselves whether a transaction would make sense for the shareholders."
More details in tomorrow's Pittsburgh Post-Gazette.
First Published: July 19, 2006, 4:00 a.m.
