Pittsburgh-based PNC Financial ( PNC) reported a 35% rise in second-quarter profits, driven by a big improvement in fee-related revenue. In the quarter, PNC earned $381 million, or $1.28 a share, compared to $282 million, or 98 cents. Revenue rose 22% to $1.79 billion. Analysts, as surveyed by Thomson Financial, had forecast earnings of $1.23 a share on revenue of $1.68 billion. The second-quarter results compared favorably to the year-ago period because they included the operations of the former Riggs Bank, which PNC acquired last year. Much of the profit gain at PNC stems from a huge 32% jump in noninterest income to $1.23 billion. The bank says it took in more fees from "asset management, equity management, corporate services, trading and consumer services'' in the quarter. Net interest income, the profit generated from the bank's deposit and lending operation, rose 4% to $562 million. PNC, like many banks, has found it difficult to boost its net interest income because of the narrowing spread between short- and long-term interest rates. The so-called flattening yield-curve effect has left bank's with fewer high-yielding opportunities to invest customer deposits. The bank's net interest margin, a measure of the profitability of a bank's deposit and lending operation, fell to a paltry 2.9%, down from 2.95% in the first quarter of this year. "Our business mix, disciplined expense control and risk-management principles position us well for what we believe will continue to be a challenging interest rate environment," says PNC Chairman and CEO James Rohr.