(Bloomberg) -- PNC Financial Services Group Inc., the second-largest U.S. regional bank, said second-quarter profit more than doubled, beating analysts estimates, as fee revenue surged and the firm set aside less for bad loans.
Net income climbed to $1.12 billion, or $1.99 a share, from $546 million, or 98 cents, a year earlier, the Pittsburgh-based bank said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was for earnings $1.63 a share.
PNC, led by Chief Executive Officer Bill Demchak since April, has focused on boosting fee revenue by adding clients in its asset-management business and providing more services to customers acquired through last years acquisition of RBC Bank USA. Non-interest income jumped 65 percent to $1.81 billion in the second quarter from a year earlier.
PNCs second-quarter results reflect the progress were making in the execution of our strategic priorities, Demchak, 50, said in the statement. We grew revenue on the strength of non-interest income, benefited from market conditions and remained disciplined on expense management.
PNC fell 0.8 percent to $74.50 yesterday in New York. The shares have gained 28 percent this year, outpacing the 25 percent advance of the 24-company KBW Bank Index.
Fees from PNCs asset-management unit climbed 22 percent to $340 million from a year earlier. Corporate services revenue jumped 12 percent to $326 million and consumer services rose 8 percent to $314 million.
Mortgage Revenue
Net interest income declined 11 percent to $2.26 billion on lower yields from loans and securities, PNC said in the statement.
The bank set aside $157 million for soured loans in the second quarter, or 39 percent less than a year earlier.
Revenue from residential mortgage banking fell 9 percent to $240 million in the second quarter. PNCs provision for residential mortgage repurchase obligations fell to $73 million from $438 million a year earlier. Last years second-quarter earnings were reduced by that $438 million pretax provision as claims related to loans sold to government-sponsored enterprises increased.
U.S. home prices have been rising at the fastest pace since 2006. Still, bank executives have warned that higher interest rates will temper profits as demand for mortgage refinancing abates. The average rate for a 30-year fixed mortgage climbed to 4.51 percent this month from a near-record low of 3.35 percent in May.
Dramatic Reduction
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who runs the biggest U.S. bank, said last week that higher rates could lead to a dramatic reduction in profits for the New York-based lenders mortgage business. Wells Fargo & Co. CEO John Stumpf said last week refinance volume will drop significantly if rates stay elevated.
JPMorgan posted second-quarter profit last week that jumped 31 percent to $6.5 billion as revenue from trading and investment banking outweighed a drop in consumer and community banking. Profit at Wells Fargo, the largest U.S. home lender, rose 19 percent to $5.52 billion as the San Francisco-based bank trimmed expenses.
