PNC Financial Services Group Inc., which acquired Baltimore's Mercantile Bankshares last year, reported yesterday a second-quarter profit that unexpectedly jumped 19 percent on higher corporate loans.
The stock soared after the bank, Pennsylvania's largest, said it was "optimistic" about the rest of the year.
Net income climbed to $505 million, or $1.45 a share, from $423 million, or $1.22, a year earlier, the bank said. PNC was expected to earn $1.15 a share, according to the average estimate of six analysts surveyed by Bloomberg.
PNC's corporate loans were up 21 percent, to $4.4 billion, helping offset surging provisions for credit losses.
Chief Executive Officer James Rohr positioned PNC to rely less on residential construction and home-equity lending than most regional banks do, while earning fees from its stake in money manager BlackRock Inc.
"PNC has very high credit quality in terms of their underwriting. They don't have subprime loans, and they didn't take brokered loans outside their franchise area, which has gotten a lot of banks into trouble," said Steve Gutch, research director for Clover Capital Management Inc. in Rochester, N.Y.
PNC stock rose $7.84, or 14 percent, to $65.75 yesterday in New York Stock Exchange composite trading after soaring 16 percent Wednesday.
PNC benefited from a $52 million gain on compensation costs at BlackRock. Excluding that gain and other one-time items, profit was $477 million, or $1.37 a share. The bank was expected to earn $1.16 a share on that basis, according to a Bloomberg News survey of 14 analysts.
"This is a strong quarter financially for us," Rohr said in a conference call. "We're optimistic about the rest of the year."
Provisions for credit losses increased to $186 million from $54 million in the year-earlier period. Charge-offs of loans for which the bank doesn't expect to be repaid increased to $112 million from $32 million.
PNC raised its provisions estimate for the year to $750 million from $600 million, Chief Financial Officer Richard Johnson said.
"Economic conditions are changing as we're seeing higher unemployment rates and slower economic growth," Johnson said.
Revenue rose 19 percent to $2.04 billion, PNC said. Noninterest expenses rose 7.2 percent to $1.12 billion.
PNC's revenue will grow faster than had been expected this year because of net interest income gains of at least 28 percent, Johnson said. Revenue growth could be in the "mid-teens," and non-interest expense growth could be in the "mid-to-low single digits," he said.