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PNC Considers Selling BlackRock Stake

Stocks in this article: PNCBLKUSBWFC

NEW YORK ( TheStreet) -- Shares of BlackRock (BLK) have returned a whopping 42% this year through Tuesday's close of $291.69, and that's a very big deal for PNC Financial Services Group (PNC).

PNC of Pittsburgh "owned approximately 36 million common stock equivalent shares of BlackRock equity" as of March 31, according to the bank's 10-Q filing, with a carrying value of $5.6 billion. PNC "accounts for its investment in BlackRock under the equity method of accounting," according to the filing, "exclusive of a related deferred tax liability of $1.9 billion at both March 31, 2013." The bank's voting interest in BlackRock common shares is about 21%.

But the market value of PNC's common stake in BlackRock was $9.2 billion as of March 31, and the value of the BlackRock stake rose to more than $10.5 billion as of Tuesday's close.

PNC is leaving a lot of money on the table. Then again, because of the accounting treatment, the BlackRock stake added $138 million in revenue and $108 million in net income to PNC's first-quarter results.


"Obviously the BlackRock state for PNC has been a long-term, very valuable relationship," PNC Chief Financial Officer Rick Johnson said at a conference on Tuesday, according to a transcript provided by Thomson Reuters, adding that "clearly the value of what we hold is worth a lot more and sits on our books today."

"At some point we have to clearly recognize that value and do something, and when we do it, I think we would like to do it in the most tax-efficient manner possible," Johnson said. He hinted that it could take some time for a sale to be made, as "there's still a lot of regulation left to be determined, both from a PNC and a BlackRock side to decide how both companies move forward in this environment."

PNC's first-quarter net income attributable to common shareholders was $938 million, or $1.76 a share, increasing from $766 million, or $1.44 a share, during the first quarter of 2012. The bank's first-quarter return on average assets (ROA) was 1.34%, improving from 1.16% a year earlier, while its return on average common equity (ROCE) was 10.68%, improving from 9.41% during the first quarter of 2012.

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