BB&T (BBT) and PNC Financial (PNC) Results

PNC Financial Services Group Inc's (PNC) third-quarter profit fell by a greater-than-expected 39 percent, as bad loans increased slightly due to the credit crisis, Pennsylvania's largest bank said on Thursday.
Net income fell to $248 million, or 71 cents per share, from $407 million, or $1.19 a year earlier. The average Wall Street estimate was 84 cents, according to Reuters Estimates.
Revenues fell 5.5 percent to $1.65 billion in the third quarter.
PNC's net charge-offs, a measure of bad loans, increased in the third quarter of 2008 to $122 million, or 0.66 percent of average loans, compared with $112 million, or 0.62 percent, in the second quarter (far lower than most peers, at well below 1%) The increase was primarily due to commercial real estate loans and home equity consumer loans, PNC said.
In addition, the provision for credit losses for the third quarter rose slightly to $190 million compared with $186 million in the linked quarter.
The bank increased its allowance for loan and lease losses -- the money it sets aside to cover bad debt -- to $1.05 billion from $717 million.
Net interest income rose 31 percent to $1 billion. Net interest margin -- the difference between what the bank earns on loans and pays on deposits -- rose to 3.46 percent from 3 percent a year earlier, but fell from 3.47 percent in the second quarter.
Noninterest income, or earnings from fees and other charges, fell to $654 million from $990 million, primarily due to market volatility and the sale of a subsidiary.
PNC also booked losses of $82 million on the value of commercial mortgage loans held for sale; $74 million on preferred stock in Freddie Mac and Fannie Mae; and a $51 charge on the valuation of certain BlackRock Inc. holdings.
"Credit trends continue to show modest deterioration, but no negative surprises outside of residential construction," Citigroup analysts said in a research note. "(The) biggest negative in quarter was very weak fee revenue trends (mostly in market-sensitive businesses and other) and no offset on the expense side. Negative surprises on market-sensitive revenues continue to be a weakness for PNC," they added.
The estimated Tier 1 risk-based capital ratio was 8.2 percent at the end of the third quarter.
PNC owns about one-third of BlackRock Inc (BLK), the largest publicly traded U.S. asset manager.
The bank operates more than 1,100 branches in eight mid-Atlantic and Midwest states and Washington, D.C., and has about $145.6 billion of assets.
During the third quarter, BB&T declared a quarterly cash dividend of $.47 per share, up 2.2% compared to the third quarter of 2007. BB&T has increased the cash dividend for 37 consecutive years and has paid a dividend every year since 1903.
“During a time of great uncertainty, PNC posted solid third quarter results reflecting the quality of our balance sheet and maintained strong capital and liquidity positions,” CEO James Rohr said in a statement. “Our core business activities performed very well and we grew loans, deposits and customer relationships. Credit quality continued to be manageable as we adhered to our strategy of maintaining a moderate risk profile. Nonetheless, PNC was not immune to the effects of market dislocation on certain fair value assets. During these extraordinary times, we continue to believe our business model positions the company for growth.”

Full earnings report here

BB&T (BBT)

BB&T Corp (BBT), a large U.S. Southeast regional bank, on Thursday said third-quarter profit fell 19 percent as a weakening economy fueled rising losses on its loans, offsetting higher fees and wider lending margins
Net income for Winston-Salem, North Carolina-based BB&T fell to $358 million, or 65 cents a share, from $444 million or 80 cents, a year earlier. Excluding one-time items, BB&T said it earned 64 cents a share. The average analyst forecast was 66 cents a share, according to Reuters Estimates.
BB&T said it set aside $364 million to deal with bad loans in the quarter, up from $105 million a year earlier. The bank says the increase in its provision for credit losses was “largely driven by continued challenges in residential real estate markets,” with losses heavy in Georgia, Florida and Washington, D.C. – all places that have been hit hard by the housing decline.
BB&T's nonperforming asset levels and credit losses increased further in the third quarter of 2008 compared to the second quarter of 2008. Nonperforming assets, as a percentage of total assets, increased to 1.20% at Sept. 30, compared to .95% at June 30. Annualized net charge-offs were 1.00% of average loans and leases for the third quarter of 2008, up from .72% in the second quarter of 2008. (PNC actully looks like it is doing better on this measure)
Tier 1 leverage ratio was 7.6%, up from 7.2% last quarter.
As of Sept. 30, BB&T had $137 billion in assets and 1,501 branches in 11 states and the District of Columbia.
"While we are not immune to the unprecedented challenges in the financial markets, BB&T remains a strong and financially sound company," said Chairman and Chief Executive Officer John A. Allison. "Our capital levels, debt ratings and earnings are among the best in the industry. Our pre-tax pre-provision operating earnings for the third quarter were $865 million, an increase of 12.0% compared to the same period last year, indicating that we are growing our client base and that our underlying businesses are performing well despite market and credit challenges. Our net interest margin improved for the fourth consecutive quarter and many of our fee income businesses continue to produce healthy revenue growth.

Full earnings report here

Overall, 2 banks not needing government handouts (but I'm sure they'll get force fed some) and run conservatively; and still making profits. Hopefully they are able to acquire some assets of smaller banks, as the FDIC takes out a bevy in the year to come.

Long both names in fund; no personal position

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