PNC Financial Services Group,Pennsylvania's largest bank, Thursday said fourth-quarter profit fell 53 percent, hurt by credit losses and write-downs for commercial mortgages in its portfolio.
The bank's shares fell as much as 7.2 percent after executives said PNC has no plans to buy back stock at least through June as it tries to rebuild its capital levels.
Net income for the Pittsburgh-based bank fell to $178 million, or 52 cents per share, from $376 million, or $1.27 a share, a year earlier.
Profit totaled $1.07 per share excluding merger costs, investments related to its BlackRock Inc money management affiliate, and antitrust litigation involving credit card network Visa Inc, PNC said. On that basis, profit matched the average analyst forecast, Reuters Estimates said.
PNC set aside $188 million for bad loans, more than four times as much as a year earlier, while net charge-offs rose 84 percent to $83 million. Nonperforming assets nearly tripled to $478 million, and rose 67 percent from the end of September. PNC ended the year with $138.9 billion of assets.
"We're seeing market conditions that no one could have predicted," including capital market volatility and credit weakness in residential real estate, Chief Executive James Rohr said on a conference call.
On Dec. 12, PNC had projected quarterly profit $1 to $1.15 per share excluding items. It said results would be hurt by losses tied to $1.5 billion of commercial mortgage loans, weak trading results, and a jump in bad loans.
In late morning trading, PNC shares were down $2.85, or 4.7 percent, at $58.14, after earlier falling to $56.62.
Chief Financial Officer Richard Johnson said PNC expects to be "on the sidelines" for stock buybacks at least through June, as it tries to boost its Tier-1 capital ratio to the 7.5 percent to 8 percent range by year-end from 6.8 percent on Dec. 31.
The ratio measures a bank's ability to cover losses. While PNC's ratio is above the 6 percent that regulators say reflects a "well-capitalized" bank, Johnson called it "a little thinner than I would like in this environment."
Rohr nevertheless said he was "comfortable" with analyst projections for profit of $5.35 to $5.95 per share on an adjusted basis for 2008, up from $5.05 in 2007.
He also said PNC would "rather just run our business" now than consider more purchases, adding: "I don't see us as a takeover target."
Rohr has made several acquisitions in recent years, including Washington, D.C.'s Riggs National, Baltimore's Mercantile Bankshares and New Jersey's Yardville National Bancorp.
Profit rose 17 percent to $215 million in consumer banking, and fell 28 percent to $91 million in corporate and institutional banking profit. Profit at the PFPC processing and technology unit rose 3 percent to $32 million. The rest of PNC generated a $160 million loss.
PNC owns about one-third of BlackRock , the largest publicly traded U.S. asset manager. BlackRock on Thursday said quarterly profit rose 90 percent, helped by asset inflows as investors flocked to the lower-risk, fixed-income investments in which it specializes.
Through Wednesday, PNC shares had fallen 18 percent in the last year, compared with a 29 percent drop in the Philadelphia KBW Bank Index.