By Elizabeth Dexheimer
PNC Financial Services Group Inc., the second-biggest U.S. regional bank including its Akron operations, said Wednesday that its profit rose 6.5 percent, beating analysts’ estimates as expenses declined.
First-quarter net income climbed to $1.06 billion, or $1.82 a share, from $995 million, or $1.74, a year earlier, the Pittsburgh-based bank said. Results beat the $1.65 average estimate of 24 analysts surveyed by Bloomberg.
Chief Executive Officer Bill Demchak, 51, has cut jobs, consolidated branches and announced plans to reduce costs by $500 million this year to help counter weakness in mortgage banking, which made up about 7 percent of the bank’s total revenue last year.
PNC was the second-best performer in a 24-company tally called the KBW Bank Index in the first quarter and received permission from the Federal Reserve last month to raise its quarterly dividend to 48 cents a share.
“Expense levels will be helped by PNC’s reduced mortgage headcount,” said Moshe Orenbuch, an analyst at Credit Suisse Group AG, in an April 7 note to clients. “Management continues to review redundancies and integration expenses and revamping in order to bring down expenses.”
PNC joins banks such as Wells Fargo & Co. and JPMorgan Chase & Co. that have struggled to increase revenue with interest rates near historic lows and demand for U.S. home loans declining. Lending has fallen since mid-2013 and a surge in all-cash purchases may push the market down again this year, according to the Mortgage Bankers Association.
PNC shares have climbed about 12 percent in the first three months of 2014, outpacing the KBW Bank Index’s 4.4 percent gain.
“The shares continue to trade at a modest discount,” Chris Mutascio, an analyst at Stifel Financial Corp.’s KBW unit, said in an April 2 note. “We expect the level of net interest income to stabilize on a quarterly basis. If we are correct, then the issue that has caused investors to place a discounted valuation on the shares may finally be nearing an end.”