PNC Earnings Slip as Bank Completes RBC Unit Acquisition
PNC Financial services (NYSE: PNC) Earnings decreased 2.5% to $811 million as the bank invested $145 million in the acquisition of Royal Bank of Canada's U.S. unit.
Earnings per share were $1.44, the Pittsburgh-based bank said today in a statement. Earnings were expected to be $1.48 per share, according to analysts surveyed by Bloomberg, and would have been $1.62 without the RBC acquisition costs. Last year the bank earned $832 million or $1.57 per share.
PNC completed the purchase of RBC Bank USA March 12, allowing the bank to expand in the Southeast US. This is the companies 7th acquisition in eight years as it seeks to expand in the US and Canada, it said in a statement issued at the time of the acquisition. There were more than 400 branches and $18 billion in deposits added to PNC with the purchase.
"PNC had excellent results for the first quarter reflecting strong performance across our markets," Chairman and Chief Executive Officer James E. Rohr said in the earnings report released today. "Our success in growing revenue is a direct result of our success in growing customers and loans."
In December 2011 PNC acquired 27 branches from Flagstar Bank, about $210 million in deposits, in the Atlanta metropolitan area.
“PNC increased full-year net interest income and expense guidance and reduced provision guidance. Net-net, the guidance is probably a wash to slightly better,” said Jefferies (NYSE: JEF) in an analyst's note issued today. Jefferies ranks PNC “buy.” “Excluding one-timers, operating expenses were about in line with our estimate.”
PNC will not be making any large acquisitions in the next 12 to 18 months according to an analyst's note from Bank of America (NYSE: BAC). The bank will have to rebuild its deposits and backing for loans as regulators did not require it to raise capital to close the RBC Bank deal.
The bank moved back its timeline to meet Basel III capital requirements from during 2013 to year end 2013. Higher capital requirements will begin to be phased in during the year. PNC's Basel Tier 1 capital decreased by 1% with the acquisition of RBC Bank.
“As expected, there were some moving pieces in the quarter, but underneath the noise results looked solid,” said Oppenheimer (NYSE: OPY), an investment boutique, in a note issued today. Oppenheimer ranks PNC “perform.”
First-quarter revenue rose 3% as income from residential mortgages rose 18% to $230 million.
Loans at PNC increased 18% from a year earlier, with the largest gain commercial loans, which increased from $80 billion to $100.6 billion. About half of the new commercial loans came from the RBC Bank acquisition. Deposits increased 13% from $182 billion to $206 billion.
PNC, the sixth-largest US bank in terms of assets, had a smaller decrease in earnings that rivals Goldman Sachs (NYSE: GS) and JPMorgan (NYSE: JPM), who saw earnings fall 23% and 3% respectively according to the companies' reports issued earlier this month. Both banks topped analysts' earnings estimates.
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