What are the primary reasons for PNC's revised earnings expectations for Q4 2007?

The downward revision in earnings expectations is primarily due to lower noninterest income from valuation adjustments on commercial mortgage loans held for sale and reduced trading results stemming from unprecedented market price volatility. Additionally, an increase in the provision for credit losses, mainly related to residential real estate development, and a higher obligation related to its BlackRock/LTIP shares also contributed.

Are the valuation adjustments on commercial mortgage loans a sign of deteriorating credit quality?

PNC stated that the commercial mortgage valuation adjustments and reduced trading income do not represent credit quality concerns with the underlying loans or trading assets. Instead, they are primarily attributed to general market liquidity pressures and systemic market volatility.

What is the expected impact of the Sterling Financial Corporation merger on this filing?

This filing primarily focuses on the revised earnings expectations for Q4 2007. However, it does mention the ongoing merger with Sterling Financial Corporation, informing investors that a proxy statement/prospectus and other relevant documents will be filed with the SEC, which will contain important information about the transaction.

How has PNC's investment in BlackRock performed recently?

As of December 10, 2007, the market value of PNC's investment in BlackRock had increased significantly, rising approximately $2 billion from the end of the third quarter to $9.6 billion on a pre-tax basis. This increase, however, also raised PNC's obligation related to its BlackRock/LTIP shares.

PNC 8-K: Regulation FD — Dec 12, 2007

Summary

PNC Financial Services Group, Inc. (PNC) issued this 8-K filing on December 12, 2007, to provide updated expectations for its fourth quarter 2007 earnings. The company anticipates reporting diluted earnings per share between $0.60 and $0.75, and adjusted diluted earnings per share between $1.00 and $1.15. This downward revision is primarily driven by valuation adjustments on commercial mortgage loans held for sale and lower trading results due to significant market volatility, an increased provision for credit losses, particularly related to residential real estate development, and an increased obligation related to its BlackRock shares. Despite these factors, PNC emphasized that the commercial mortgage and trading asset issues are not indicative of underlying credit quality concerns but rather market liquidity pressures. The increased provision for credit losses is mainly tied to exposures in residential real estate development in Maryland and Northern Virginia, though the company maintains that overall asset quality remains relatively strong. The filing also provides details on the impact of BlackRock's stock price on PNC's financial obligations and the ongoing merger with Sterling Financial Corporation.

Key Highlights

1PNC lowered its Q4 2007 diluted EPS guidance to a range of $0.60 - $0.75.
2Adjusted diluted EPS for Q4 2007 is now expected to be between $1.00 - $1.15.
3Lower noninterest income is attributed to valuation adjustments on $1.5 billion of commercial mortgage loans held for sale and weaker trading results due to market volatility.
4An increased provision for credit losses is anticipated, primarily linked to residential real estate development exposures.
5The company's BlackRock/LTIP shares obligation increased due to a significant rise in BlackRock's stock price, impacting reported earnings.
6The market value of PNC's investment in BlackRock grew to $9.6 billion (pre-tax) as of December 10, 2007.
7PNC is proceeding with its merger with Sterling Financial Corporation and has provided information on how investors can access related filings.

PNC FINANCIAL SERVICES GROUP, INC. 8-K Report, Regulation FD Disclosure (Dec 12, 2007)

Summary

Key Highlights

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