February 3, 2009 / 4:55 PM / 10 years ago

PNC to cut 5,800 jobs

NEW YORK (Reuters) - PNC Financial Services Group Inc (PNC.N) said it plans to cut 5,800 jobs following its recent purchase of troubled lender National City Corp, and also posted a fourth-quarter loss.

A National City customer uses an ATM at a branch of the National City Corp bank in Strongsville, Ohio, October 21, 2008. REUTERS/Aaron Josefczyk

Shares of PNC fell as much as 17.7 percent as results fell short of analysts’ forecasts and the bank stopped short of a commitment to maintain its quarterly dividend.

The fourth-quarter loss for Pittsburgh-based PNC was $248 million, or 77 cents per share, compared with a profit of $178 million, or 52 cents, a year earlier. Revenue increased 3 percent to $1.68 billion.

Excluding merger costs, profit was 32 cents per share. On that basis, according to Reuters Estimates, analysts on average expected 78 cents per share on revenue of $1.91 billion.

Results were “a bit light” because of an 18 percent drop in fee income, and as the bank set aside five times more for loan losses, Barclays Capital analyst Jason Goldberg wrote.

PNC on December 31 paid $3.9 billion for Cleveland-based National City, after the latter struggled with losses from subprime mortgages and other troubled assets.

Regulators had pushed National City to find a buyer, and PNC used part of a $7.6 billion infusion it got from the U.S. government’s Troubled Asset Relief Program to buy the bank.

The combined company is the seventh-largest U.S. bank, with $291.1 billion of assets and 2,589 branches.

PNC expects the job cuts to affect 9.7 percent of the combined banks’ 59,595-person workforce. It expects to complete the cuts by 2011 to help save $1.2 billion annually.

Banks, insurers and asset managers worldwide have cut more than 312,000 jobs since the credit crisis began in 2007.

PNC Chief Executive James Rohr said he now expects the National City purchase to boost earnings per share in 2009, sooner than expected.

But on a conference call, he would not commit to preserving the bank’s quarterly dividend of 66 cents per share. PNC’s board will next consider the dividend in the first week of April. “A lot will change between now and then,” he said.

In late-morning trading, PNC shares were down $4.44, or 13.8 percent, at $27.74 after earlier falling to $26.50.

CREDIT LOSSES RISE

PNC set aside $990 million in the quarter for credit losses, including $504 million at National City.

The total amount grew from $188 million a year earlier, in part because of losses tied to residential real estate development and commercial real estate exposure.

“A rapidly weakening economy resulted in increased provisions and asset impairments,” Chief Financial Officer Richard Johnson said on the conference call.

PNC reported a Tier-1 capital ratio, which measures its ability to cover losses, of 9.7 percent, which is above the 6 percent regulatory minimum.

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Quarterly profit in consumer banking fell 93 percent to $15 million, and in corporate and investment banking fell 81 percent to $17 million, both reflecting higher credit losses. Investment servicing profit fell 22 percent to $25 million.

PNC also has a roughly one-third stake in BlackRock Inc (BLK.N), the big money manager.

Through Monday, PNC shares had fallen 50 percent in the last year, compared with a 69 percent drop in the KBW Bank Index .BKX.

Editing by John Wallace

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