PNC Financial Services (PNC), the seventh-largest U.S. commercial bank by deposits, said second-quarter profit declined 40% on costs tied to mortgage-putback demands.
Net income fell to $546 million, or 98 cents a share, from $912 million, or $1.67, a year earlier, the Pittsburgh-based bank said today in a statement. The average estimate of 22 analysts surveyed by Bloomberg was for adjusted earnings of $1.22 a share.
PNC, led by Chief Executive Officer Jim Rohr, 63, said earnings were reduced by a $284 million cost related to residential mortgage loan repurchase demands. The company said last month said it would boost reserves by $350 million for that purpose. PNC is facing increased claims related to loans sold to a government-sponsored enterprise as a result of the National City Corp. acquisition in 2009, the company said.
"While we experienced a few items that reduced our earnings in the short term, we were very pleased with our success in continuing to grow customer relationships and loans resulting in strong revenue," Rohr said in the statement.
The company said it expects so-called putback demands from Fannie Mae and Freddie Mac to increase for loans sold in 2006 through 2008.
PNC, which has gained 6.8% this year in New York trading, closed yesterday at $61.59.
Revenue percentage gains this year will be in the "high single digits," Chief Financial Officer Richard Johnson said after the company released first-quarter earnings on April 18.
PNC paid about $3.47 billion for Royal Bank of Canada's RBC Bank USA and its related credit-card assets, a transaction that was completed in March. The purchase is expected to add 40 cents to earnings per share for the full year, excluding integration costs, Johnson said in April.
The bank's PNC Bank unit agreed last month to pay $90 million to settle a lawsuit accusing it of improperly manipulating customers' debit-card transactions to generate excess overdraft fees, lawyers for the plaintiffs said.
