PNC Financial Services Group Inc. (PNC), the seventh-largest U.S. bank by deposits, fell 4% after reporting a third-quarter profit that missed analysts' estimates.
PNC was trading at $60.41 late Tuesday; its shares had gained 9.1 percent this year through Monday.
Net income rose to $925 million, or $1.64 per share, from $834 million, or $1.55, a year earlier, the Pittsburgh-based bank said today in a statement. Excluding the effects of securities transactions and integration costs, profit was $1.63 a share. The average estimate of 32 analysts surveyed by Bloomberg was $1.66. Return on common equity dropped to 10.15 percent from 10.25 percent in the third quarter last year.
"We think the street will be moderately disappointed in PNC's third-quarter revenue and core earnings power," Ed Najarian, an analyst at International Strategy & Investment Group LLC, said in a note.
PNC's net interest margin, the difference between what a bank pays in deposits and what it charges for loans, fell to 3.82 percent in the third quarter from 3.89 percent a year earlier and from 4.08 percent in this year's second quarter. Total loans climbed 18 percent to $181.9 billion from a year earlier and slowed to a 1 percent increase from this year's second quarter.
"Loan growth slowed down and there was compression on the net interest margin," Terry McEvoy, an Oppenheimer & Co. analyst, said in a phone interview. PNC expects an increase in preferred dividends and that, "combined with a lower starting base for the margin, could make certain investors concerned that there's some downside risk to consensus earnings for next year."
PNC, led by Chief Executive Officer Jim Rohr, 63, said last month it expects 2013 revenue to exceed this year's total. The lender projects an increase in fee income, particularly from new customers, Rohr told investors at a conference in September.
"We continued to increase the number of customers we serve, resulting in revenue and loan growth," Rohr said in the statement. "We also remained focused on controlling costs while investing for the future and managing risk and capital."
Non-interest income climbed 23 percent to $1.69 billion in the third quarter from a year earlier, according to the statement. Helping fuel that increase was residential mortgage banking income, which rose 15 percent to $264 million. Corporate services income grew 58 percent to $295 million.
Total revenue for the quarter was $4.09 billion, a 15 percent increase from a year earlier. Net interest income rose 10 percent to $2.4 billion.
The bank set aside $228 million for loan losses in the quarter, compared with $261 million a year earlier. Net write- offs declined 9.3 percent to $331 million.
Non-interest expenses rose 24 percent to $2.65 billion from the same period last year. PNC said the increase was primarily driven by costs related to the acquisition of RBC Bank USA and non-cash charges related to the redemption of trust-preferred securities. Personnel expenses also rose, climbing 23 percent to $1.17 billion as higher stock market prices drove an increase in the cost of deferred compensation obligations, PNC said.
