Summary
PNC Financial Services Group, Inc. (PNC) filed an 8-K report on September 27, 2006, detailing a strategic repositioning of its mortgage loan portfolio and providing an update on its subsidiary BlackRock. The company announced plans to sell or securitize approximately $2.0 billion of residential mortgage loans. This action is expected to result in a pre-tax loss of approximately $50 million in the third quarter of 2006, primarily due to the mark-to-market valuation of these loans reflecting increased interest rates. PNC anticipates that this repositioning will enhance the overall yield of its loan portfolio and boost net interest income by roughly $25 million annually. Additionally, the filing confirms the anticipated closing of the transaction between BlackRock, a majority-owned subsidiary of PNC, and Merrill Lynch. This deal involves Merrill Lynch contributing its investment management business to BlackRock in exchange for BlackRock stock. The expected closing date is September 29, 2006. In light of BlackRock's third-quarter earnings release scheduled for October 30, 2006, PNC has adjusted its own third-quarter earnings release date to October 31, 2006.
Key Highlights
- 1PNC plans to sell or securitize approximately $2.0 billion of residential mortgage loans.
- 2A pre-tax loss of approximately $50 million is expected in Q3 2006 due to the transfer of these loans to 'held for sale' status and their mark-to-market valuation.
- 3The loss is attributed primarily to the impact of increased interest rates on the loan portfolio.
- 4PNC expects to increase its total loan portfolio yield and improve net interest income by approximately $25 million annually through this strategic move.
- 5The transaction where Merrill Lynch contributes its investment management business to PNC's subsidiary BlackRock is expected to close on September 29, 2006.
- 6PNC has rescheduled its Q3 2006 earnings release to October 31, 2006, following BlackRock's announcement.