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Why the PNC Q4 Earnings Report Is Better Than Expected

http://www.fool.com/investing/general/2013/01/17/why-the-pnc-q4-earnings-report-is-better-than-expe.aspx

Amanda Alix
January 17, 2013

There were a few nice surprises in PNC Financial's (NYSE: PNC) Q4 earnings  report today, and from the rise in the stock price this morning, the news was music to investors' ears. Even though the bank reported a $0.47 charge to its earnings per share, a little probing shows that the big regional bank has some juicy tidbits to share with its investors -- not the least of which is a revenue increase of 15% and an EPS jump that was still 46%.

More mortgage-related charges
Investors doubtless took the news of the EPS charge in stride. After all, at this time last year, the bank announced a $0.30 charge  for basically the same reason: mortgage-mess cleanup. The charge this year is larger, but there are good reasons not to worry.

Digging in, the EPS of $1.24, though lower than estimates, is not as bad as it seems. Taking the announced charge out of the picture gives earnings of $1.71 per share, or $1.55 if PNC's gain on the sale of its Visa shares is factored in. That is more than respectable, and here's another biggie: The bank's return on equity jumped to 7.48% from a measly 5.7% one year ago.

A big acquisition is pulling its weight
At least some of the good news is attributable to PNC's 2012 purchase of Royal Bank of Canada's U.S. unit, which helped boost the bottom line in several ways. PNC inherited nearly a half-million new checking account clients, and the acquisition had a positive effect on the bank's net interest margin. Net interest margin dropped to 3.85% from 3.86% one ye