PNC Financial 3rd-qtr profit falls by 39 percent

PITTSBURGH - PNC Financial Services Group Inc. on Thursday said its third-quarter profit fell 39 percent as it increased the amount it set aside to cover bad loans, and the number of loans in arrears rose.

The bank said it earned $248 million, or 71 cents per share, in the three months ended Sept. 30, down from $407 million, or $1.19 per share, in the prior-year quarter.

The results missed the average estimate of 88 cents per share among analysts polled by Thomson Reuters.

Net interest income rose to $1 billion for the period, up 31 percent from $761 million year over year, as the bank's costs fell along with interest rates, and acquisitions contributed growth.

Noninterest income, or earnings from fees and other charges, fell to $654 million from $990 million, primarily due to market volatility and the sale of a subsidiary.

PNC also booked losses of $82 million on the value of commercial mortgage loans held for sale; $74 million on preferred stock in Freddie Mac and Fannie Mae; and a $51 charge on the valuation of certain BlackRock Inc. holdings. These items were partially offset by a $61 million gain from a legal settlement and the reversal of a related reserve established in connection with an acquisition.

The bank increased its allowance for loan and lease losses — the money it sets aside to cover bad debt — to $1.05 billion from $717 million.

The amount of debt written off as uncollectable, also called net charge-offs, more than doubled to $122 million from $49 million. The increase was primarily due to commercial real estate loans and home equity consumer loans, PNC said.

Nonperforming assets, or loans that were past due, jumped to $875 million from $301 million last year, due mostly to souring residential real estate development loans and loans in related sectors.

PNC said its average loans for the third quarter of 2008 increased 13 percent over third quarter 2007, and it continued to make credit available to customers.

In morning trading, PNC shares fell $1.38, or 2.2 percent, to $60.02.

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