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Sale of BlackRock Boosts PNC to Profitable Quarter

The sale of its stake in the global asset management firm BlackRock (NYSE: BLK) helped PNC Financial Services Group (NYSE: PNC) generate nearly $3.7 billion in profits ($8.40 diluted earnings per common share) in the second quarter of 2020.

But disregarding the one-time gain, PNC reported a loss in operating net income of $744 million, down from positive operating net income of $759 million in the first quarter and $1.2 billion in the second quarter of 2019.

In May of this year, PNC announced that it would sell its very lucrative 22.4% ownership stake in BlackRock, which the Pittsburgh-based bank first acquired roughly 25 years ago.

PNC Bank

Image source: Getty Images.

The goal was to generate capital so PNC could go on the offensive if any attractive acquisition opportunities emerged as the coronavirus pandemic pushed bank valuations lower.

The sale of its stake in BlackRock produced net proceeds $14.2 billion and an after-tax gain of $4.3 billion.

"The monetization of our BlackRock investment and recent CCAR [stress test] results underscore the strength of our balance sheet," CEO Bill Demchak said in a statement. "Our book value per share increased significantly, and PNC is very well positioned with substantial capital and liquidity flexibility to continue to support our constituents and capitalize on opportunities that may arise during these challenging times."

Total revenue of nearly $4.1 billion in the quarter was down from the second quarter of 2019, while PNC also set aside nearly $2.5 billion to cover potential loan losses, up from $914 million in the first quarter of the year.

Actual loan losses and credit quality remained fairly stable, given the deteriorating economic conditions.

The bank booked net charge-offs (debt unlikely to be collected) of $236 million. While that's up 66% from the second quarter of 2019, it's only up 11% from the first quarter of the year.

Meanwhile, nonperforming loans (those in which the borrower hasn't made a payment on in 90 days) of roughly $1.9 billion in the quarter are only up 9% from the second quarter of 2019.

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