Bloomberg News

PNC Falls After Adding $350 Million to Buyback Liability

June 12, 2012

PNC Financial Services Group Inc. (PNC:US), the seventh-largest U.S. commercial bank by deposits, dropped as much as 4.4 percent after saying it will boost reserves by $350 million to cover demands for refunds on faulty mortgages.

PNC expects to add the sum in the current quarter following increased claims related to loans sold to a government-sponsored enterprise as a result of the National City Corp. acquisition in 2009, Chief Executive Officer Jim Rohr said today. The stock fell (PNC:US) $1.49, or 2.6 percent, to $56.68 at 12:12 p.m. in New York, the biggest percentage drop in the 24-company KBW Bank Index.

Expenses tied to faulty mortgages and foreclosures have cost the nation’s biggest banks more than $72 billion since the start of 2007, according to data compiled by Bloomberg. Lenders say the threat of more “putbacks” is deterring them from making new home loans backed by Freddie Mac and Fannie Mae.

One of the GSEs “has been requesting and reviewing increasing larger number of files over the recent months, particularly those that defaulted more than two years ago,” Rohr said today at an investor conference in New York. “Questions regarding property values and the accuracy of appraisals have been a common reason cited for the repurchase demands.”

Fred Solomon, a spokesman for Pittsburgh-based PNC, declined to name the GSE Rohr was referring to in his remarks.

Soured Loans

Bank of America Corp. (BAC:US), the second-biggest U.S. lender, said earlier this year it’s facing more demands by Fannie Mae for refunds on flawed home loans. The Charlotte, North Carolina- based bank will buy back $330 million of mortgages from Freddie Mac, the other U.S.-controlled mortgage buyer.

Bank of America’s backlog of pending demands for refunds on soured loans reached a record $16.1 billion in the first quarter following the deepening dispute between the lender and Fannie Mae, which stopped accepting new loans from Bank of America in January.

Banks sell mortgages to investors and government-backed enterprises with a promise to buy them back if data on borrowers, their income or the property later turn out to be false.

PNC’s boosted reserve will represent 43 cents per diluted share in the second quarter, Rohr said. The lender is “appropriately reserved” for this change, he said.

PNC’s first-quarter net income (PNC:US) fell to $811 million from $832 million a year earlier. The company put aside 56 percent less for soured loans during the first three months.

To contact the reporter on this story: Laura Marcinek in New York at

To contact the editor responsible for this story: David Scheer at

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Companies Mentioned

  • PNC
    (PNC Financial Services Group Inc/The)
    • $87.89 USD
    • -0.05
    • -0.06%
  • BAC
    (Bank of America Corp)
    • $16.95 USD
    • -0.09
    • -0.53%
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