As part of its integration process and cost reduction efforts,
PNC Financial Services Group Inc.
) announced 33 job cuts in its builder finance segment in
Houston. The downsizing will be implemented in the upcoming
Earlier in March, PNC Financial completed the purchase of RBC
Bank (USA), the U.S. retail banking subsidiary of
Royal Bank of Canada
). PNC Financial bought 100% of the issued and outstanding shares
of RBC Bank for around $3.47 billion in cash.
However, as part of the integration process, PNC Financial
strategically purged a number of business segments such as the
builder finance group, which was primarily located in Houston.
Even though the majority of PNC's builder finance portfolio has
been trimmed, the bank has shifted parts of the portfolio to
other units. The latest layoffs come on the heels of 60 job cuts
since March in the builder finance segment. PNC Financial plans
to eliminate a total of 93 employees by December.
Majority of the U.S. banks are struggling to control costs
amidst the stringent regulatory environment and dismal
macro-economic factors. In September,
Bank of America Corporation
) announced its plans to layoff nearly 16,000 employees by the
end of the current year as part of its cost-cutting efforts in
order to boost top-line growth. The estimated headcount following
the job cuts would be nearly 260,000, the lowest since
Amidst the sluggish economic environment, banks have been
increasingly adopting rigorous cost-cutting measures to maintain
a sound capital buffer in order to endure a financial crisis.
However, with numerous job losses, unemployment rate could worsen
and further slow down the economic recovery.
We believe the downsizing strategies are of utmost importance
to PNC Financial, since it will help the company attain its goal
of bringing down expenses. The company's non-interest expense in
the third quarter of 2012 was $2.6 billion, unchanged from the
PNC Financial's shares maintain a Zacks #3 Rank, which
translates into a short-term Hold rating. However, we believe
that prudent business model changes along with cost cutting
initiatives can lead to an improvement in efficiency and add to
its competitive edge. These factors may ultimately result in
upward estimate revisions, thereby leading to an improved Zacks
Rank. In the same sector,
M&T Bank Corporation
) retains a Zacks #1 Rank.
BANK OF AMER CP (BAC): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
ROYAL BANK CDA (RY): Free Stock Analysis
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