New tax code helps PNC profits to spike

Pittsburgh Post-Gazette

PNC Financial Services Group kicked off a batch of earnings reports due from local banks for the fourth quarter, reporting Friday that profits more than doubled as it benefited from a $911 million boost from the new federal tax code.

The Pittsburgh-based banking giant earned $2 billion, or $4.18 per share, up from $982 million, or $1.97 in the same period a year earlier. Excluding the impact of tax legislation and special items, per share profits were $2.29.

Revenue for the quarter climbed 10 percent to $4.3 billion from $3.9 billion.

Pittsburgh’s market leader was the first of the region’s biggest financial institutions to report year-end results for 2017. The area’s No. 2 retail bank, Citizens Financial, is to release results next Friday, with No. 3 FNB reporting the following week.

Meanwhile, money management and investment services powerhouse Bank of New York Mellon is scheduled to release results on Tuesday.

“By just about any measure, 2017 was a successful year for PNC,” Chairman and CEO William S. Demchak said in a statement.

“We grew loans and deposits and added customers across our businesses, continued to focus on expense management, and generated record fee income for the year, as well as in the fourth quarter.”

PNC previously announced it would be handing out $1,000 bonuses to most of its employees in the first quarter because of the tax windfall.

The tax benefit in the fourth quarterwas primarily because of revaluation of deferred tax liabilities at the lower statutory tax rate, PNC said.

On another bright note, PNC said that consumer loan balances grew for the first time in four years. The bank has been working on streamlining the consumer loan process to make it easier for consumers to navigate.

In a conference call, Mr. Demchak told analysts PNC would continue to shrink its brick-and-mortar footprint this year by roughly 100 branches as customers do more of their banking electronically. The bank has some 2,460 branches.

The Pittsburgh-based bank also will continue to focus on controlling expenses with a goal of identifying $250 million in cost savings this year, on top of $350 million last year.

For the full year, PNC earned $5.1 billion, or $10.36 per share, up from $3.7 billion, or $7.30, in 2016. Excluding the tax benefit and special items, per share profits were $8.50.

Revenue for 2017 was $16.3 billion, up 7 percent from $15.2 billion the previous year.

Separately Friday, the Federal Reserve said it was fining PNC Financial Services Group and four other major U.S. financial institutions a total of $35 million to settle enforcement actions over improper handling of mortgage foreclosures.

The other firms were Goldman Sachs, Morgan Stanley, CIT Group and U.S. Bancorp. PNC’s fine is $3.5 million.

Previously, Ally Financial, Bank of America, HSBC North America Holdings, JPMorgan Chase and SunTrust Banks paid fines in the cases, which date to 2011 and 2012.

The Fed said it was ending the enforcement actions against all 10 banks because of “sustainable improvements” in their servicing practices.