PNC Posts 53% Decline in Net On Visa, BlackRock Charges
PNC Financial Services Group Inc.'s fourth-quarter net income slumped 53% due to charges related to Visa Inc. and BlackRock Inc., and surging credit losses.
The Pittsburgh bank recorded net income of $178 million, or 52 cents a share, compared with $376 million, or $1.27 a share, a year earlier. The results included 24 cents a share in obligations related to the company's investment in BlackRock, a 16-cent charge related to the settlement of a $2.25 billion lawsuit between Visa and American Express Co., and 15 cents a share in integration costs. Excluding items, per-share earnings fell to $1.07 from $1.32.
Revenue rose 6.1% to $1.63 billion. Analysts polled by Thomson Financial, on average, expected earnings of $1.07 a share on revenue of $1.68 billion. PNC warned in December that earnings would be between 60 cents to 75 cents, or $1 to $1.15 excluding items -- well short of analysts' expectations at the time.
"Our fourth-quarter performance did not meet our expectations due to challenges that included unprecedented market volatility and credit deterioration in our residential real-estate development portfolio," said Chairman and Chief Executive James Rohr. He added that "assuming a reasonable economy," PNC should do better than 2007 in the coming year.
The company's return on equity, a key measure of profitability at financial firms, dropped to 4.78% from 13.82%. The net interest margin, the margin between interest earned and interest paid on deposits, fell to 2.96% from 3%. The company's provision for credit losses more than quadrupled to $188 million from $42 million. The percentage of net charge-offs, loans it doesn't think are collectable, rose to 0.49% from 0.36%. Nonperforming assets doubled to 0.7% of total assets.
Write to Andrew Edwards at andrew.edwards@dowjones.com
