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PNC to record $390M in mortgage-related expenses in 4Q

| Wednesday, Jan. 9, 2013, 10:46 a.m.

PNC Financial Services Group will record $390 million in expenses related to its home mortgage banking business when it discloses fourth-quarter results on Jan. 17, the bank said on Wednesday.

Included in the expenses is a $70 million charge for the October-December period related to a government settlement of improper mortgage practices. That charge, along with other one-time expenses, will cut quarterly profit by 47 cents a share, according to a securities filing.

PNC and nine other major U.S. banks on Monday agreed to an $8.5 billion settlement with bank regulators over allegations that they wrongfully foreclosed on homeowners. The settlement with the Federal Reserve Board and the Office of the Comptroller of the Currency stems from a 2011 consent agreement with regulators.

The settlement covers as many as 3.8 million homeowners who were in foreclosure in 2009 and 2010. Of those 3.8 million mortgages, PNC serviced about 2 percent, or 76,000 loans.

“The banking industry and PNC are probably about 75 percent through this whole mortgage litigation mess,” said Nancy Bush, a banking analyst for SNL Financial, an industry research firm in Charlottesville, Va.

“I think this is coming to an end, but it still could go on in dribs and drabs for a few more years,” said Bush.

The other mortgage-related expenses PNC disclosed relate to the bank's obligation to buy back mortgage securities sold to Fannie Mae and Freddie Mac. The bank set aside $254 million for that purpose in the October-December quarter, bringing its buy-back reserve to $614 million at year-end. PNC also took a $45 million charge to write down the value of home mortgages it holds.

In addition, PNC said it will book $105 million in expenses related to integrating over 400 RBC Bank USA branches it acquired from the Royal Bank of Canada last March, and related to the redemption of securities.

PNC also booked a $130 million gain from the partial sale of its stake in Visa.

In its filing, PNC estimated that excluding the one-time expenses and gains, it would report fourth-quarter earnings of at least $1.57 a share, which is Wall Street's consensus estimate.

“I view that (estimate) as a positive,” said analyst Bush. “But I'll be curious to know how they'll get there.”

Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or tolson@tribweb.com.

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