Magazine article American Banker

PNC Warns Repositioning Will Result in 2Q Charges

Magazine article American Banker

PNC Warns Repositioning Will Result in 2Q Charges

Article excerpt

PNC Financial Services Group Inc. told investors that special charges related to its securities portfolio and the Riggs National Corp. purchase would reduce its second-quarter earnings.

In a quarterly filing Tuesday with the Securities and Exchange Commission, PNC said it had restructured its balance sheet to better position its assets for rising interest rates and boost net interest income.

The repositioning will result in unrealized losses of $31 million, which would be included in second-quarter earnings, PNC said.

Analysts said the charges could be offset by a sizable commercial loan recovery that the Pittsburgh company has said it hopes to report for this quarter.

Gerard Cassidy, an analyst with Royal Bank of Canada's RBC Capital Markets, said it made practical sense for PNC to book securities losses in a quarter in which they could be offset. But it is odd that PNC -- which has told investors for the past several quarters that its balance sheet was set for rising interest rates -- had to reposition assets at a loss, he said.

Many were disappointed by the unexpected news, and some analysts were put off by the significant charges.

"I thought the first-quarter results were great -- now there is a blemish," said Claire Percarpio of Janney Montgomery Scott LLC.

Michael Mayo, an analyst with Prudential Equity Research Group, wrote in a research note, "While this action would better position the company to rising interest rates and improve PNC's spread revenues ... it is unfortunate that PNC needs to take such a charge for what looks like regular asset-liability management."

PNC said in the filing that it sold $2.1 billion of securities available for sale late last month and early this month and terminated $1 billion of resale agreements most sensitive to rising shorter-term interest rates. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.