"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.
Johnson on Tuesday discussed how the company is seeking to improve its efficiency ratio, which it reported to be 63% during the first quarter. "That's not good enough, and I think we get that," he said. "A lot of that is because of the bets we have on the table, the majority of those bets, the investments that were made and how long it's going to take to get a return on those, and that's one of the reasons we focus so hard on expenses." The efficiency ratio is, essentially, the number of pennies of expenses incurred for each dollar of revenue; lower is better. U.S. Bancorp's first-quarter efficiency ratio was 50.7%, while Wells Fargo reported an efficiency ratio of 58.3%. When discussing PNC's efforts to improve the efficiency ratio, Johnson said, "I think we need to be in the high 50s." He threw a big bone to investors when he said "the business model will generate over time mid-teen return on tangible equity." Johnson plans to step down from his chief financial officer role in the third quarter, with PNC veteran Robert Reilly slated to take over the position. In April, William Demchak took over as PNC's CEO, with former CEO James Rohr taking the position of executive chairman, with plans to retire in 2014. Atlantic Equities analyst Richard Staite rates PNC "overweight," with a price target of $76. Staite discussed Johnson's comments on a possible sale of the BlackRock stake and efficiency improvements in a note to clients on Wednesday, writing that "we welcome such comments and see them as an indication that new management is more focused on driving shareholder returns."
Interested in more on PNC Financial Services Group? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn