PNC Financial Services Group Inc. (PNC) reported Wednesday a higher profit for its first quarter, significantly above analysts' estimates, on lower expenses and continued customer growth.
Chairman and Chief Executive Officer James Rohr said, "PNC's diversified businesses delivered solid revenue despite weaker lending in the first quarter and ? combined with significantly reduced expenses ? drove improved returns for our shareholders. We are making important progress on all of our strategic priorities as we continue to focus on growing deposits, loans and revenue."
In its first quarter, net income attributable to common shareholders was $938 million or $1.76 per share, higher than last year's $766 million or $1.44 per share. On average, 30 analysts polled by Thomson Reuters expected the company to report earnings of $1.57 per share for the quarter. Analysts' estimates typically exclude special items.
The company attributed the strong first-quarter earnings to continued customer growth and a significant increase in pretax pre-provision earnings driven by solid revenue and a substantial reduction in expenses.
Revenues for the quarter rose 6 percent to $3.96 billion from $3.73 billion in the prior year quarter. Analysts had consensus revenue estimate of $3.98 billion for the quarter.
Sequentially, revenues dropped 3 percent primarily due to a decrease in noninterest income from lower asset sales.
In the quarter, net interest income improved 4 percent from last year to $2.39 billion as a result of higher core net interest income from organic loan growth, lower funding costs and the full quarter impact of the RBC Bank (USA) acquisition.
Meanwhile, the net interest margin decreased modestly to 3.81 percent from prior year's 3.90 percent reflecting lower purchase accounting accretion as core net interest margin has remained stable.
Noninterest income was $1.57 billion, a growth of 9 percent from the previous year. During the period, asset management fees improved on stronger equity markets and growth in customers. Consumer service fees were benefited from growth in customers and transaction volume. Higher commercial mortgage servicing revenue benefited corporate service fees.
Meanwhile, residential mortgage banking revenue decreased as lower net hedging gains on mortgage servicing rights were partially offset by higher loan sales revenue.
The company noted that its provision for credit losses increased to $236 million from last year's $185 million, primarily reflecting a larger loan portfolio.
Noninterest expense decreased from last year primarily as a full quarter of operating expense for the RBC Bank (USA) acquisition was offset by the absence of last year's integration costs.
Total loans as of March 31 increased $0.7 billion from December 31, 2012 as loan growth slowed in the first quarter. Total deposits decreased $1.5 billion from December 31.
Looking ahead, PNC Financial said it is on track to reduce its full year 2013 noninterest expense from 2012 levels and achieve its $700 million continuous improvement expense savings goal for 2013.
PNC shares closed Tuesday's trading at $64.79, up $1.04 or 1.63 percent.
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