PNC Slashes Dividend to Build Capital

Updated from 8:15 a.m. EST

PNC Financial (PNC Quote) slashed its dividend by 85% in what the company called a "proactive step" to protect its balance sheet and capital levels.

The Pittsburgh-based company said early Monday that its board plans to reduce the company's quarterly dividend to 10 cents a share from 66 cents a share. The move is expected to save roughly $1 billion in capital each year, PNC said.

"While our overall capital and liquidity positions are strong, extreme market deterioration and the changing regulatory environment drove this difficult but prudent decision," Chairman and CEO James Rohr said in a statement Monday. "We continue to be optimistic about the long-term benefits of the National City acquisition."

The bank said its first-quarter results to date are in line with the estimates of Wall Street analysts. Analysts, on average, predict the company to earn 52 cents a share for the first three months of the year, according to Thomson Reuters.

Pittsburgh-based PNC said its tier-1 risk-based capital ratio was 9.7% at the end of 2008, while its tangible common equity ratio was 2.9%.

"Given today's economic uncertainty, we believe the dividend reduction was simply the prudent thing to do," Rohr said on a brief analyst conference call Monday morning.

He added that the company does not plan to issue any additional common shares.

PNC received $7.6 billion last year through the Treasury Department's Troubled Asset Relief Program, or TARP. The company acquired troubled lender, National City on Dec. 31.