Magazine article American Banker

PNC Shares Regaining Some Lost Momentum

Magazine article American Banker

PNC Shares Regaining Some Lost Momentum

Article excerpt

Shares of PNC Financial Corp. are moving back toward the higher prices reached after a hefty dividend increase was announced.

On Oct. 1, the Pittsburgh company raised the quarterly payout on its common stock by 7.5% and announced a 2-for-1 stock split.

The actions initially caused PNC stock to surge by about $3, or 5%, to $53.

However, the gains quickly evaporated, with the stock dropping as low as $51.75 on Oct. 7 and 8.

Analysts said PNC shares were hit by investors' general lack of enthusiasm for bank stocks in recent weeks.

|Steady Stock, Lousy Market'

The shares have been on the rebound this week, however. On Thursday, PNC stock was trading at $52.875, up 25 cents.

"Actually, it has been a steady stock in a lousy market," said Nancy A. Bush of Brown Brothers, Harriman & Co., New York. "There is a profound lack of direction in both the economy and the market right now."

Anthony Davis, bank analyst at Wheat First Securities, Richmond, Va., said he was surprised by the size of the dividend increase, to 57 cents per share, from 53 cents. It is payable Oct. 24 to shareholders of record of Oct. 13.

Broader Appeal Noted

Ms. Bush said she had expected a nominal dividend increase this year and a more substantial one next year.

The stock split is effective Nov. 16 for holders or record of Oct. 22. Since a $50 price level is a psychological barrier for some investors, the split should broaden the appeal of the stock and lessen its volatility, Ms. Bush said.

Analysts view PNC's dividend action as the first of a series by the quality regional and superregional banks.

Capital levels at many banks have been growing faster than new assets because of continued sluggishness in lending. This has created excess capital, which banks must pay out in dividends or face lower returns on equity. …

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