Updated from 8:32 a.m. EDT
PNC Financial Group
blew past Wall Street's profit expectations in the first quarter, as its acquisition of National City provided benefits that outweighed its reserve-building for bad loans.
The Pittsburgh-based bank's net income jumped 38% to $530 million from a year ago. Its profit of $1.03 per diluted common share more than doubled the 42 cents expected by analysts, according to Thomson Reuters. The earnings per common share were calculated after the company paid a $47 million dividend to the federal government in connection with its investment made through the Troubled Asset Relief Program.
Chairman and CEO James Rohr attributed the strong results to the Nat City acquisition, which closed Dec. 31. The company said it was accretive to first-quarter earnings and is expected to be accretive for the full year. It provided cost savings of about $400 million realized in the first quarter and is expected to reduce noninterest expense by $1.2 billion for the full year.
"We are on pace to exceed the strategic objectives of our acquisition, and we are seeing solid client and deposit growth throughout our markets," Rohr said in a statement. "In this difficult time, PNC is committed to building an even stronger company, actively lending to qualified consumers and businesses, and supporting economic recovery efforts."
Shares were rising 2.8% to $39.14 in recent trading.
PNC built its loan-loss reserves in the quarter, as asset quality deteriorated amid the recession. The company added $4.3 billion to reserves in the period, vs. $3.9 billion in the fourth quarter. The total provision for credit losses at the end of the period stood at $880 million.
Net charge-offs as a percentage of average loans decreased in the quarter, to 1.01%, vs. 1.09% in the fourth quarter. Nonperforming assets jumped to $3.5 billion, vs. $2.2 billion in the fourth quarter.
This article was written by a staff member of TheStreet.com.