PNC Posts $248 Million Q4 Loss, Amid National City Acquisition

PNC Financial Services Group, Inc. (PNC) reported Tuesday morning a loss of $248 million, or $.77 per diluted share, for the fourth quarter of 2008 — driven by costs tied to its takeover of ailed Cleveland-based National City Corp. — compared with a net income of $178 million in the fourth quarter of 2007, or $.52 per diluted share. PNC’s reported loss includes the costs related to its acquisition of National City, which was completed on December 31, 2008, and made PNC the fifth largest bank in the United States. Integration costs, which included conforming provisions for credit losses for acquisitions, primarily National City, according to the report, were $380 million for the fourth quarter and $422 million for full year 2008. Despite acquisition costs, for the longer term, the acquisition is expected to be a “home run” said RBC Capital Markets analyst Gerard Cassidy in a note to investors at the end of January. Year-end income at PNC rang in at $882 million — $2.46 per share — compared with a significantly higher income of $1.47 billion, or $4.35 per share, in 2007, but an income nonetheless. The firm “successfully executed its business strategies in 2008 and delivered solid results during a time of unprecedented markets and a weakening economy,” said PNC CEO James Rohr. “During the year we strengthened our capital, liquidity and loan loss reserve coverage. The acquisition of National City provided us with a unique opportunity to grow our franchise, doubling our assets and customers. Our two-year integration plan is underway…” Retail banking came out of fourth quarter with $15 million in earnings, $196 million shy of last year’s fourth-quarter earnings and $64 million less than the linked quarter — a decline that’s primarily due to an increase in the provision for credit losses, PNC said. Corporate and Institutional Banking earned $17 million in Q4. Results were strong for all sectors except real estate, according to the report The commercial mortgage servicing portfolio on a combined basis with National City was $286 billion as of December 31, 2008. Of that total, PNC Corporate & Institutional Banking commercial mortgage servicing portfolio was $249 billion compared with $243 billion at December 31, 2007 and $247 billion at September 30, 2008. Servicing portfolio additions have been modest since the third quarter of 2007, PNC said, due to the declining volumes in the commercial mortgage securitization market. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.