PNC 2Q profit falls 41 pct on mortgage repurchases
PITTSBURGH (AP) — PNC Financial Services Group Inc. said Wednesday its second-quarter net income shrank 41 percent, as the bank set aside hundreds of millions of dollars to buy back home mortgages.
PNC and other banks have been buying back soured mortgages from investors who bought them before the financial crisis and now say they were misled about their quality.
The Pittsburgh bank said it expects Fannie Mae and Freddie Mac to continue demanding that it buy back more residential mortgages. The two government-sponsored agencies own or guarantee about half of U.S. home mortgages.
For the April-June quarter, net income after paying preferred dividends came to $526 million, or 98 cents per share, from $888 million, or $1.67 per share, in the same period last year.
Analysts, on average, expected a profit of $1.14 per share, according to a FactSet poll.
The recent quarter's results included $284 million in costs related to its home loan repurchase obligations.
Revenue rose 1 percent to $3.62 billion from $3.6 billion a year ago. Analysts expected $3.68 billion in revenue.
Net interest income, or income collected on loans, jumped 17 percent to $2.53 billion, boosted by contributions from its March acquisition of RBC Bank (USA), the U.S. retail banking division of the Royal Bank of Canada.
That growth offset a 24 percent drop in non-interest income to $1.1 billion, which largely stemmed from the setting aside of $438 million for mortgage repurchase obligations. The company set aside just $21 million in the year-ago period.
Shares of the bank, which serves institutions as well as consumers, fell 49 cents to $61.10 in premarket trading.