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PNC Financial

(PNC) - Get PNC Financial Services Group, Inc. Report

on Thursday reported fourth-quarter net income of $798 million, or $1.50 a share, beating the consensus estimate of $1.38 cents a share among analysts polled by Thomson Reuters.

The fourth-quarter results compared to net income of $1.1 billion, or $2.07 cents a share, in the third quarter and $1 billion, or $2.17 a share, in the fourth quarter of 2009.

Fourth-quarter 2010 results included a $160 million gain on the sale of PNC's stake in



, as part of that company's secondary offering in November. Results a year earlier included a $1.1 billion gain on PNC's portion of BlackRock's gain on its acquisition of Barclays Global Investors from

Barclays PLC

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Third-quarter earnings were boosted by $328 million after-tax gain on the company's sale of its PNC Global Investment Servicing business to

Bank of New York Mellon

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, which was completed in July.

For the full year, PNC reported net income to common shareholders of $3 billion, or $5.74 a share, increasing from $2 billion, or $4.36 a share, in 2009.

The company's credit expenses continued to improve, with a fourth-quarter provision for credit losses of $442 million, compared to $486 million the previous quarter and $1 billion a year earlier.

Fourth-quarter net charge-offs - loan losses less recoveries - totaled $791 million and exceeded the provision for credit losses by $349 million. The reserve release of $349 million boosted PNC's bottom line, following the trend for many large banks, including


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, which reported a net release of allowance for loan losses and unfunded lending commitments was $2.3 billion,

Wells Fargo

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, which released $850 million from reserves; and

JPMorgan Chase

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, which saw a $1.9 billion decline in loan loss reserves.

The fourth-quarter ratio of net charge-offs to average loans was 2.09%. Loan loss reserves covered 3.25% of total loans as of December 31, staying "well ahead of the pace" of charge-offs, despite the reserve release.

The net interest margin - essentially a bank's average yield on loans and investments less its average cost of funds - was 3.93% during the fourth quarter, declining from 3.96% the previous quarter and 4.05% a year earlier, which PNC attributed to "lower purchase accounting accretion, continued soft loan demand and the low interest rate environment partially offset by deposit repricing."

Asset management fee income totaled $303 million in the fourth quarter, increasing 22% from the previous quarter and 38% year-over-year. Corporate Services fee income totaled $370 million during the fourth quarter, double the level in the third quarter and increasing 42% from a year earlier. Consumer Services fee income was $322 million during the fourth quarter, a slight decline from the previous quarter but an increase of 2% from the fourth quarter of 2009.

The company said that the CARD Act, which was signed into law by President Obama in May 2009, had "had a full year 2010 negative impact on revenue of approximately $75 million, largely in net interest income, including approximately $25 million in the fourth quarter of 2010," and that new rules on checking account overdraft fees and coming rules limiting interchange fees would a portion of its debit card revenue "at risk in the second half of 2011 depending on final rules." PNC's debit card revenue for 2010 totaled approximately $480 million.

PNC reported record capital levels as of year-end, with a Tier 1 common equity ratio of 9.8% and a regulatory total risk-based capital ratio of 15.6%.

CEO James Rohr said "PNC's businesses performed well and have the scale to compete successfully in a consolidating industry despite economic headwinds and significant regulatory change. As 2011 unfolds, we see opportunities for growth and the potential to drive even greater value for our shareholders."


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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.