PNC Profit Fueled by 18% Jump in Mortgage Revenue (Update 1)
- PNC reports first-quarter earnings per share of $1.44.
- Analysts were expecting EPS of $1.43.
- First-quarter mortgage revenue grew 18% year-over-year, to $230 million.
Updated with comments from Jefferies analyst Ken Usdin.
The Pittsburgh lender reported first-quarter earnings of $811 million, or $1.44 a share, compared to $493 million, or 85 cent a share, during the fourth quarter of 2011. The bank reported a profit of $832 million, or $1.57 a share, during the first quarter of 2011.
The first-quarter earnings came in a penny ahead of the $1.43 estimate among analysts polled by Thomson Reuters.
PNC said that the first-quarter results "included $145 million pretax, or $.18 per diluted common share, for integration costs" from the company's acquisition of RBC Bank (USA), "and $38 million pretax, or $.05 per diluted common share, of residential mortgage foreclosure-related expense." The fourth-quarter results "included $.30 per diluted common share of residential mortgage foreclosure-related expense, a noncash charge of $.24 per diluted common share related to redemption of trust preferred securities and $.04 per diluted common share for integration costs."
First-quarter net interest income totaled $2.3 billion, increasing 4% sequentially and 5% year-over-year, "driven by loans from the RBC Bank (USA) acquisition, loan growth and lower funding costs. "
Noninterest income totaled $1.4 billion during the first quarter, increasing 7% from the fourth quarter, but declining 1% from the first quarter of 2011.
In addition to the strong growth in mortgage income -- following the industry trend, in part from President Obama's expansion of the Home Affordable Refinance Program, or HARP 2, allowing certain mortgage borrowers to refinance their full balances at today's low rates no matter how much the value of the underlying home has dropped -- PNC saw its first-quarter asset management revenue increase 14% sequentially and 8% year-over-year, to $284 million.
Corporate services revenue totaled $232 million during the first quarter, declining 13% from the fourth quarter, but increasing 7% from a year earlier.
A $151 million release of loan loss reserves directly boosted operating earnings.
Total loans were $176.2 billion as of March 31, increasing 11% from the fourth quarter and 18% from the first quarter of 2011. While most of that growth reflected the RBC Bank (USA) acquisition, PNC said that $3.3 billion in commercial loan in the first quarter resulted from "growth in new and existing client activity in corporate banking, asset-based lending and real estate finance."
The company's first-quarter return on average assets was 1.16%, compared to 0.72% in the fourth quarter and 1.29% in the first quarter of 2011. The return on average common equity was 9.41% in the first quarter, compared to 5.70% the previous quarter and 11.12% a year earlier.