Tax Law Boosts PNC Profit -- Update

By Christina Rexrode Features Dow Jones Newswires

PNC Financial Services Group Inc. said Friday that fourth-quarter earnings doubled compared with a year ago, boosted by a one-time gain from the recently passed tax overhaul.

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Profit at the Pittsburgh-based bank rose to $2.08 billion, from $1.03 billion a year ago.

Per-share earnings were $4.18. That beat the $3.96 a share expected by analysts polled by Thomson Reuters.

Without the one-time tax gain and other items, earnings would have been $2.29 a share. Analysts had expected $2.20 a share.

PNC is the first major regional bank to report earnings this quarter, but its results aren't necessarily a trendsetter. Though the new tax law is expected to boost earnings across the banking industry in the long term, its impact on fourth-quarter earnings will be disparate.

In a statement, Chief Executive William Demchak noted the benefit from the new tax law and said it gives the bank "increased flexibility as we continue to invest in our businesses, communities and our employees."

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PNC and other banks have announced that they will raise wages for lower-paid employees as a result of the new tax law.

Revenue at PNC was up 10% from a year ago to $4.26 billion. That also beat the expectations of analysts.

Average total loans grew 5% from a year ago to $221.12 billion, fueled by growth in commercial lending. Though commercial-loan growth was tepid across the banking industry last year, PNC has bucked the trend and is expanding its business. Consumer loans were down from a year ago.

PNC also benefited from higher interest rates, which allow it to charge more on loans. Net interest income grew 10%. The bank's net interest margin, a key measure of lending profitability, also grew. The Federal Reserve raised short-term rates three times last year.

The bank increased the amount it set aside for possible credit losses, to $125 million from $67 million a year ago. The bank said it increased the provision for consumer losses over the quarter, but lowered the provision for commercial losses.

Some of PNC's bigger rivals, including Citigroup Inc. and Bank of America Corp., have said that their results this quarter will be hurt by the new tax law. Those two banks, which report results next week, took big losses in the financial crisis and are still using those to defray future tax bills. Those so-called deferred tax assets are less valuable now that the corporate tax rate is lower.

PNC, however, has deferred tax liabilities, or taxes it expects to pay in the future. The new, lower tax rate reduces those liabilities, which results in a gain to income. According to the most recent disclosure, PNC has $2.37 billion in net deferred tax liabilities.

Shares, which have been trading at all-time highs, were up in premarket trading.

Write to Christina Rexrode at christina.rexrode@wsj.com

(END) Dow Jones Newswires

January 12, 2018 07:57 ET (12:57 GMT)