Another multimillion dollar earnings loss is on the way for PNC Financial Services Group Inc., which is unloading $2 billion in loans.
The parent of PNC Bank expects to recognize a $50 million pretax loss in the third quarter due to its plans to sell or securitize approximately $2 billion of loans from its residential mortgage portfolio, according to a filing Thursday with the Securities and Exchange Commission.
The loss from the loans, which will be transferred to loans held for sale as of Sept. 30, “represents the decline in value of the loans almost entirely from the impact of increases in interest rates,” PNC said in the filing.
The mortgage loan portfolio restructuring follows PNC’s Sept. 8 announcement that it expected sell $6 billion in securities and book a $200 million loss on the deal. PNC spokesman Fred Solomon said some of these were commercial-backed securities and others were agency securities, which, although he could not confirm, led him to assume “there were probably some residential” securities involved.
Solomon emphasized that even though the deals will create losses, they will increase annual net interest income.
The Pennsylvania-based company said it expects to replace the loans from its residential mortgage portfolio with others that will increase the overall yield on the total loan portfolio and improve net interest income by approximately $25 million annually.
As for the securities portfolio restructuring, the company expects to “get more than $50 million in annual NII increase over what we had originally estimated,” Solomon said.