PNC Financial Services Group Inc. and Comerica Inc. beat the Street's fourth-quarter expectations with help from their asset management businesses.
PNC's BlackRock subsidiary on Thursday reported fourth-quarter earnings of $73 million, up 20% from the previous quarter and 46% from a year earlier.
PNC reported earnings of $355 million for the quarter. Earnings per share at the Pittsburgh banking company were $1.20, topping analysts' average estimate by 8 cents, according to Thomson Financial.
"BlackRock has been strong for a long time. All of our businesses had a good quarter," said PNC chairman and chief executive officer James E. Rohr. "We could have a very good '06 without anything magic happening."
Comerica made $55 million selling its asset management business, Framlington Group Ltd., to Axa Investment Managers in October.
That pretax gain contributed 22 cents to the fourth quarter's earnings per share of $1.25, chief financial officer Elizabeth S. Acton said in a conference call Thursday. Comerica's per-share earnings for the quarter were 6 cents above analysts' estimates.
Earnings at the $54 billion-asset Comerica also got a boost from the Detroit company's sale of potentially bad loans and the release of $23 million of reserves. Chief credit officer Dale Greene said in a conference call that Comerica sells unfunded commitments - which in the fourth quarter were all auto-related loans - at a value under par.
Asked by an analyst whether Comerica was trying to sever ties to the auto business, chairman and CEO Ralph W. Babb Jr. was diplomatic.
"Obviously, the automotive industry is going through a lot of change at the moment, and we've been in that business for a very long time and through many cycles in the past, and I think we understand the business very well," he said.
But Mr. Babb noted that Comerica is expanding in Texas and California, and said that over time those operations will reduce its exposure to the auto industry.
"We will continue to support the automotive business," he said. "We have an excellent dealer operation that is very geographically diverse as well as nameplate-diverse. … It's a very liquid collateral position."
Some analysts focused on Comerica's core earnings per share as a more reliable gauge of its performance in the quarter; others said it made the right move in getting rid of the weak auto loans. "Pulling in your horns in a sector that has known issues is smart," said Jeff K. Davis of First Horizon National's FTN Midwest Research Securities Corp.
Comerica's credit quality improved in the fourth quarter; nonperforming assets were $162 million, down 26% from the third quarter. Loans rose 1%, to $45.2 billion, from the third quarter, and deposits fell 3%, to $42.4 billion.
Mr. Babb said the company is closing in on its three-year goal of building 50 new branches, primarily in Texas, California, and Arizona. It has built 35, including 19 in California and Arizona and 10 in Texas.
Comerica, historically a commercial lender, is trying to become a more full-service bank. But its small-business and personal financial services division brought in just 15% of its fourth-quarter profit, versus 19% in 2004's fourth quarter.
Retail earnings at the $93 billion-asset PNC rose 11% compared with the third quarter, were $195 million. That was 55% of its fourth-quarter net income.
Mr. Rohr said PNC plans to open 45 new branches this year. "We're rounding out the markets we're in, like the suburbs of Cincinnati, D.C., and New Jersey," he said in an interview.
Corporate and institutional business fell 8.5% compared with the third quarter, to $108 million.
The One PNC efficiency program aims to save $400 million by 2007. In 2005, PNC said it saved $90 million while spending $11 million to implement the plan.
PNC's chief financial officer, Richard J. Johnson, said in a conference call Thursday that of the $265 million of savings targeted for this year, $225 million would come from expense cuts. The company plans to eliminate 1,200 jobs, which Mr. Johnson said would be mostly through attrition "in the next few months."
PFPC, the securities services division, earned $29 million, 45% more than in 2004's fourth quarter. But Mr. Johnson said that kind of growth will "unsustainable" given the slowdown in the securities business.
PNC's deposits at Dec. 31 were $60.3 billion - about where they were three months earlier but up 8% from the end of 2004. Loans at yearend were $49.1 billion, down slightly from the third quarter but 13% higher than a year earlier.
