PNC to Record Nearly $500 Million in 4Q Charges

By Chris Cumming January 09, 2013, 2:57 p.m. EST 1 Min Read

M&A

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By Matthew Monks

July 18

PNC Financial Services Group (PNC) continues to be dogged by soured mortgages.

The Pittsburgh company said in a Securities and Exchange Commission filing Wednesday that it will record nearly $500 million in charges in the fourth quarter, more than half of which are related to its repurchase of troubled mortgage loans it had previously sold to Fannie Mae and Freddie Mac.

The $254 million it set aside during the fourth quarter brings the total amount it has committed to putback requests from the government-sponsored enterprises to $614 million as of Dec. 31. Much of the repurchases are tied to loans PNC inherited in its acquisitions of National City Bank in 2009 and Royal Bank of Canada's RBC Bank last year.

The SEC filing also reveals PNC's share of the $10 billion settlement that it and nine other home lenders entered into this week with the Office of the Comptroller of the Currency and the Federal Reserve's Board of Governors. The bank has set aside $70 million as part of the settlement to end the independent foreclosure review process, out of a total of $91 million in charges related to residential mortgage foreclosures for the quarter.

PNC also recorded a $45 million goodwill impairment charge to its residential mortgage banking unit, and $105 million in noncash charges for marketing and redeeming high-cost hybrid capital securities.

The company said the charges would be partially offset by a $130 million gain on the sale of shares it owned in Visa (NYSE: V), but that overall they would reduce earnings per share by 47 cents for the fourth quarter. Analysts polled by Bloomberg predicted the bank would earn $1.62 a share. It earned $1.64 per share, or $925 million, in the third quarter of 2012. The bank will release its fourth-quarter earnings on Jan. 17.

In a research note Wednesday, Evercore Partners said that it is lowering its estimates for 2012 to reflect the charges but that its estimates for 2013 remain unchanged. It also said that, despite the lingering mortgage issues, PNC "is better positioned than most peers to weather a tough economic environment" due to its strong revenue generation its capacity for reducing expenses.

PNC's shares were trading at $60.40 late Wednesday, up 0.6% from Tuesday's close.

Chris Cumming