On the earnings conference call for PNC Financial Services Group
For the fiscal fourth quarter, the bank posted net income of $376 million, or $1.27 per share, which compares to $355 million, or $1.20 per share, in the same period a year ago. Unfortunately, the inverted yield curve -- where long-term rates are lower than short-term rates -- has been problematic. For example, PNC's net interest margin has gone from 2.96% to 2.88% over the past year.
PNC had a busy 2006. First, there was the transaction with money management firm BlackRock
As seen with BlackRock's fourth-quarter results, the merger is certainly getting traction. Net income increased from $72.9 million, or $1.09 per share, to $169.4 million, or $1.28 per share. Currently, BlackRock is the No. 5 money manager in the U.S., with roughly $1.12 trillion in assets.
The next big transaction for PNC came in October -- the $6 billion purchase of Mercantile Bankshares Corporation
The quality of PNC's loan portfolio looks strong. For example, nonperforming loans fell 12% or about $20 million (compared to the end of September 2006). What's more, over the past few years, PNC has been moving aggressively into fee-based services, which should mute the impact of the inverted yield curve. Some of the services include treasury management and investment banking (through its Harris Williams & Co. unit).
Unfortunately, according to the PNC conference call, the expectation is that the inverted yield curve is going to persist for some time -- perhaps through the year. If so, it's going to continue to be a drag. And, assuming PNC is not about to do a major acquisition (which was the sentiment on the conference call), it is hard to see what will be the catalysts for the stock in 2007.
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