PNC Financial reports a dip in profit and initiates layoffs

PNC Financial reports a dip in profit and initiates layoffs

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PNC Financial Services Group (PNC.N) announced on Friday that it is laying off roughly 4% of its personnel and that its third-quarter profit fell as a result of a rise in funding costs that was somewhat offset by higher interest on its assets.

The bank also anticipated a 1% to 2% decline in its net interest income (NII), which is the gap between what banks earn on loans and pay out on deposits, in the fourth quarter. Additionally, its third-quarter NII decreased by 3% sequentially.

The outlook is in contrast to optimistic predictions from larger competitors JPMorgan Chase (JPM.N), Citigroup (C.N), and Wells Fargo (WFC.N), who gain from the aggressive interest rate increases made by the U.S. Federal Reserve.

PNC’s shares, which are based in Pittsburgh, last fell 2.4% in a shaky trade.

The bank stated that the layoffs began on October 6 and would be almost finished by the end of the fourth quarter, and that they would result in a $325 million (or 5%) decrease in annual employee costs.

According to Timothy Coffey, an analyst at Janney Montgomery Scott, “They (PNC) recognize that there is definitely a headwind to the growth and their net interest income, mainly due to the higher deposit rates and higher funding costs.”

“And so they’re trying to alleviate some of that headwind by doing what they can to cut their own non-interest expenses as a way to maintain their earnings,” he explained.

Without accounting for costs associated with the personnel reduction, the bank anticipates a 3% to 4% increase in overall core noninterest expense for the fourth quarter.

The bank’s average deposits decreased 3.8% in the third quarter to reach $422.5 billion.

According to LSEG IBES statistics, the bank recorded a quarterly profit of $3.60 per share, compared to $3.78 a year earlier, but above analysts’ average forecast of $3.11.

In contrast to expectations of $5.32 billion, revenue fell 5.7% to $5.23 billion.