PNC's 2Q Net Slumps 40% on Rising Mortgage Buybacks

By FOXBusiness

PNC Financial (NYSE:PNC) disclosed a 40% tumble in second-quarter earnings on Wednesday as the regional bank was hit by larger-than-expected mortgage buyback obligations.

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Shares of the Pittsburgh-based lender dipped about 1% in early trading in the wake of the results.

PNC logged a second-quarter profit of $551 million, down sharply from $913 million a year ago. On a per-share basis, it earned 98 cents a share, down from $1.67 a share a year earlier.

Revenue inched 0.6% higher to $3.62 billion, trailing the Street’s view of $3.71 billion.

“PNC's results for the second quarter reflected strong operating performance in a challenging environment," CEO James Rohr said in a statement.

PNC’s results were hurt by a charge of $403 million, or 76 cents a share, on the higher set asides for mortgage repurchases. The company said it “has and expects to experience elevated levels of” repurchase obligations demands, primarily tied to loans sold in 2006-2008 in agency securitizations.

While most big banks have been cutting back on provisions for credit losses, PNC’s provisions jumped to $256 million from $185 million at the end of the first quarter due to its takeover of RBC Bank. The $3.47 billion acquisition from Royal Bank of Canada (NYSE:RY) is seen adding to PNC’s bottom line in 2012, excluding integration costs.

PNC said its loans grew by $4.2 billion, or 2%, quarter-over-quarter, led by a $3.5 billion rise in commercial lending. Noninterest expenses jumped 22% to $2.65 billion.

Shares of PNC were recently off 0.78% to $61.11, leaving them up 5.38% so far this year and further trailing the broader markets.