(Updates with CEO comment in sixth paragraph, revenue in seventh.)
July 16 (Bloomberg) -- PNC Financial Services Group Inc., the second-largest U.S. regional bank, reported a profit that beat analysts’ estimates as expenses declined and the company set aside less money to cover soured loans.
Second-quarter net income fell 5.7 percent to $1.05 billion, or $1.85 a share, from $1.12 billion, or $1.98, a year earlier, the Pittsburgh-based lender said today in a statement. The average estimate of 28 analysts surveyed by Bloomberg was for adjusted profit of $1.78 a share.
PNC has benefited from an increase in asset-management fees and corporate lending as the biggest U.S. banks contend with a slump in residential mortgages. Chief Executive Officer William Demchak, 51, has cut jobs and branches as he seeks to reduce costs by $500 million this year, while focusing on expanding in the U.S. Southeast.
“This company is turning into a real growth story like U.S. Bancorp and Wells Fargo,” Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine, said in a July 14 interview with Bloomberg Radio. “Capital is accumulating very fast and we’re going to see better dividend growth.”
PNC climbed 14 percent this year through yesterday, the best performer in the 24-company KBW Bank Index, which gained 4.2 percent.
“We grew loans, our fee businesses performed well, expenses were well-managed, credit quality continued to improve and capital levels strengthened,” Demchak said in the statement.
Revenue declined 6.3 percent to $3.81 billion from a year earlier, the bank said. Fees from asset management rose 6.5 percent to $362 million and revenue from residential mortgages increased 9 percent to $182 million, according to the statement. Corporate banking earnings climbed 5.2 percent to $343 million.
Second-quarter noninterest expenses declined 3.2 percent to $2.33 billion from a year earlier, the bank said. The amount set aside for bad loans fell to $72 million from $157 million.
“They’ve got a strong expense story to tell right now,” R. Scott Siefers, an analyst at Sandler O’Neill & Partners LP, said in a phone interview before results were announced. “As long as they keep the expense story going, that’s a very big piece of their momentum.”