PNC Dazzles Even as Sector Deflates

Updated to include stock chart, latest share price.

PITTSBURGH (TheStreet) -- PNC Financial(PNC Quote) shares have been on a tear of late with accounting-related benefits stemming from its December acquisition of National City prompting investors and analysts to be far more bullish in their assessment of the company.

When PNC bought National City, it wrote down the assets dramatically. This created the possibility for substantial benefits to the bottom line if the impaired loans are paid off, a scenario that has for the most part played out.

Similar benefits from this accounting method, known as "purchase accounting" have provided big gains for JPMorgan Chase (JPM Quote) in its acquisition of Washington Mutual and Wells Fargo (WFC Quote) for its purchase of Wachovia, according to a report from Bloomberg News earlier this year.

The acquisition is also looking better because of the expiration of high-yielding CD obligations held by National City. In a move that is typical of failing banks, the company opted to pay a high rate to hang onto depositors as concerns about its solvency mounted.

PNC has also managed to wring $460 million in cost savings from the deal, and it says in its latest filing with the Securities and Exchange Commission that it's on track to reach its $1.2 billion goal. A recent note from Sandler O'Neill quoted management as saying it will exceed that target.

PNC shares took off after the bank's third-quarter report on Oct. 22, and the stock spiked higher last week after positive comments by management at a banking conference in Boston.