PNC Financial Services posted a 9.7 percent profit increase as the lender cut expenses and set aside less money for bad loans.
Third-quarter net income rose to $1 billion, or $1.79 a share, from $939 million, or $1.64, a year earlier, the Pittsburgh-based bank said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was $1.62.
Chief Executive Officer Bill Demchak said in September that revenue increases won't come easily and he expects expenses to drop 5 percent this year. The bank is starting to see the benefits of its expansion into the U.S. Southeast with the 2012 purchase of RBC Bank USA and is focusing on fee-income businesses including wealth, he said last month.
"Even in the face of an environment that is challenging the entire industry, our businesses are successfully growing loans, and we are leveraging our high-quality balance sheet to drive revenue," Demchak, 51, said in today's statement.
PNC cut its noninterest expense by 8.5 percent to $2.42 billion in the third quarter from a year earlier. Revenue declined to $3.92 billion, a 4.1 percent drop. That was led by a 27 percent decrease in fees from residential mortgage banking, which fell to $193 million. Net gains on sales of securities narrowed 48 percent to $21 million.
The bank set aside $137 million for soured loans, a 40 percent drop from the prior year.
Banks suffered declines in mortgage-banking revenue amid a jump in the benchmark 10-year Treasury yield, which rose in the third quarter to the highest since 2011, curbing borrower refinancings. JPMorgan Chase & Co., the biggest U.S. bank, said last week that mortgage fees and related revenue plunged 65 percent to $839 million. Wells Fargo & Co., the largest home lender, said mortgage-banking revenue tumbled 43 percent.
PNC said there will be "modest growth" in loans in the fourth quarter compared with the previous three months, according to a slide presentation today. Net interest income will be "down modestly" and there will be "continued growth" in fee income, according to the presentation. The bank will set aside $150 million to $225 million for bad loans during the fourth quarter, it said.
Demchak has said he plans to redefine retail banking by finding a balance between branch and mobile services. The lender reduced tellers by about 600 in the six months through Sept. 9, deploying some employees to other positions, he said then. The company will close almost 200 branches this year and open others in the Southeast where necessary, Demchak said.
"Given the changes in the operating environment, banking in the future has got to be very different from banking in the past," Demchak said in September.