US Bancorp, PNC show more loans, mixed results
(Reuters) – US Bancorp (USB.N) and PNC Financial Services Group Inc (PNC.N), two of the largest U.S. regional banks, on Wednesday reported growth in business and consumer loans in the fourth quarter, a trend that bodes well for the economy.
While US Bancorp’s quarterly results beat Wall Street estimates, PNC missed, and its shares fell 2 percent. Both banks set aside reserves that appeared related to a long-running investigation of foreclosure abuses.
The banks showed loan growth and improving credit quality in the quarter. PNC’s loans increased 2.9 percent from the third quarter to $159 billion, while US Bancorp’s grew 2.5 percent to $209.8 billion. Both cited strength in commercial loans.
Wells Fargo Co (WFC.N) and JPMorgan Chase Co (JPM.N) also showed promising signs of loan growth in their fourth-quarter earnings reports.
“Loan growth and the economy go hand in hand,” said Raymond James analyst Anthony Polini. “So there are signs it’s getting better, and that goes with the data we’re seeing from the Federal Reserve. On the whole, commercial loan growth has surprised on the upside this quarter and that’s a good sign.”
Both US Bancorp and PNC, however, said they were not seeing an increase in the utilization of commercial credit lines. Such an increase would be an indication banks were lending more to existing customers, rather than taking market share from other banks.
The banks took expenses related to mortgage servicing matters, a sign that lenders beyond the five largest mortgage servicers may join a possible settlement related to foreclosure abuses.
Several top U.S. banks are expected to sign a $20 billion to $25 billion agreement with the government in the coming weeks to resolve allegations of mortgage abuses. The Justice Department began reaching out to several other banks to gauge their interest in joining the settlement, people familiar with the matter told Reuters earlier this month, a move that could increase the total price tag of the deal.
PNC recorded $240 million in foreclosure-related expenses as a result of “ongoing governmental matters,” while US Bancorp took a $130 million charge due to mortgage servicing matters.
In a conference call with analysts, PNC Chief Executive Jim Rohr said the bank had recently been contacted by “additional regulators who gave us some information that we believed that we needed to accrue for in the fourth quarter.”
U.S. Bancorp CEO Richard Davis said it was “accurate that banks beyond the big five have been invited into the conversations, and for that we believe we have something that we need to reserve for.” The fact that the bank was setting aside reserves did not necessarily mean a final decision had been made or that a final amount had been determined, Davis said.
PNC MISSES ANALYSTS’ ESTIMATES
Pittsburgh-based PNC said net income applicable to common shareholders fell to $451 million, or 85 cents per share, in the fourth quarter from $798 million, or $1.50 per share, a year earlier.
Excluding certain items, PNC’s earnings were $1.15 per share, missing analysts’ average estimate of $1.41, according to Thomson Reuters I/B/E/S.
“We had loan growth … across the board,” Rohr said in a conference call with analysts. “I think that actually is the reason we are a little bullish on loan growth going into (2012) because it wasn’t one segment, it wasn’t one market or one region.”
US Bancorp, based in Minneapolis, said net income rose nearly 40 percent as it made more money from its core banking business. Net income applicable to common shareholders was $1.3 billion, or 69 cents per share, up from $951 million, or 49 cents per share, a year earlier.
US Bancorp’s earnings before special items came to 64 cents per share, beating analysts’ average estimate by a penny. US Bancorp shares were fractionally lower.
Davis said the bank will continue to build loans in 2012, but at a slower pace than in the fourth quarter. “I think the fact that there is loan growth at all says that the economy is doing pretty well,” he said.
In a research note, analyst Christopher Mutascio of Stifel Nicolaus Co said investors may be getting too optimistic about loan growth, citing Davis’s comments about slower growth.
“We think total loan growth and commercial loan growth are likely to slow in 2012 from the quarterly levels experienced in the back half of 2011,” he wrote.
Credit quality improved in the fourth quarter for US Bancorp, which has emerged as one of the strongest U.S. regional lenders in the wake of the 2008 financial crisis. Provisions for credit losses fell by nearly half, to $497 million.
PNC’s provisions for cover credit losses declined 57 percent to $190 million.
(Reporting by David Henry in New York,; Rick Rothacker in Charlotte, North Carolina,; Aman Shah and Jochelle Mendonca in Bangalore, Aruna Viswanatha in Washington; Editing by Lisa Von Ahn)
Article source: http://www.reuters.com/article/2012/01/18/us-bankregional-idUSTRE80H1DA20120118
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