On Tuesday,
The PNC Financial Services Group Inc.
(
PNC
) has announced that it will redeem trust preferred securities
(TruPS) further. These include redemption of 6.625% preferred
securities worth $500 million issued by National City Capital Trust
III.
PNC Financial stated that these preferred securities, having a
maturity date of May 25, 2047, will be redeemed at $25 per trust
preferred share. The redemption amount will also include accrued
and unpaid distributions until the redemption date arrives.
The TruPS redemption will take place on May 25, 2012. PNC
Financial further mentioned that it will use its existing available
cash to fund the redemptions. The Bank of New York Mellon Trust
Co., Pittsburgh, part of
The Bank of New York Mellon Corporation
(
BK
), is acting as the paying agent.
Also in March, PNC Financial announced the redemption of $306
million in TruPS, which will take place on April 25, 2012 at $25
per share. These include redemption of 6.125% capital securities of
$300 million, issued by the PNC Capital Trust D and $6 million of
10.18% MMCapS capital securities issued by Yardville Capital Trust
III.
The redemption of TruPS by PNC Financial follows the green
signal from the Federal Reserve for the company's capital actions.
In the latest round of stress tests, the Fed reviewed the company's
capital plan and did not object to any of the capital actions
proposed by it.
As part of its capital actions, PNC Financial made a proposition
relating to an increase in its quarterly common stock dividend.
Moreover, the company projected a moderate share buyback program
under its existing common stock repurchase authorization.
Last week, PNC Financial announced a 14% hike in its quarterly
dividend. With this increase, the quarterly cash dividend now
stands at 40 cents per share, up 5 cents from 35 cents paid
earlier. Moreover, PNC Financial also intends to buyback up to $250
million of common stock under its existing 25 million shares
repurchase program, during the remainder of 2012.
The clearance of the stress test is a testimony of PNC
Financial's solid capital position. With its proven cash generating
capacities, the company remains committed to its shareholders by
enhancing their wealth through dividend raises and share buybacks.
Its cash and due from banks stood at $4.1 billion as of December
31, 2011.
Our Take
By redeeming TruPS PNC Financial will be able to lower the
interest costs, as these securities demand higher rates compared to
others. Moreover, according to the Dodd-Frank Act, from 2013, banks
will no longer be able to include these securities as regulatory
capital.
PNC Financial currently retains a Zacks #3 Rank, which
translates into a short-term 'Hold' rating. Considering the
fundamentals, we also maintain our long-term "Neutral" rating on
the stock.
BANK OF NY MELL (
BK
): Free Stock Analysis Report
PNC FINL SVC CP (
PNC
): Free Stock Analysis Report
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