Moody's Cuts PNC Debt, Preferred Stock Ratings

The actions had no impact on FDIC-guaranteed debt issued by PNC, which remains rated "Aaa" with a stable outlook.

The downgrades came less than a week after PNC was named as one of the banks that didn't pass the government's "stress tests." PNC needs to raise $600 million, the Treasury Department said. Moody's said it believes PNC can "comfortably raise that amount of equity."

PNC received about $7.6 billion in emergency funding through Treasury's Troubled Asset Relief Program.

Moody's said the downgrades reflect its belief that while the National City buyout will add value to PNC in the long term, it has weakened the bank in the short term. "Moody's believes PNC's tangible common equity ratio is somewhat low when compared with the potential credit costs it faces in the near-term, largely related to real estate exposures," the downgrade said.

The ratings agency said the bank needs to strengthen its common equity position, and must find a way to combine the two banks. Longer-term, PNC faces difficulty trying to grow its banking franchise in National City markets like Michigan, Northern Ohio and Florida, all areas that continue to suffer because of the real-estate crisis.