PNC Financial Services Group’s third-quarter results benefited from a disciplined expense management strategy that earlier this month also included residential mortgage business layoffs.
These firings reduced that line of its workforce by 7%.
Its priorities include strengthening PNC’s capital position and improving operational cost efficiencies, says William Demchak, president and chief executive.
The layoffs will result in annual savings of about $24 million, which it should begin to see in the fourth quarter. The full realization of these savings will be in the first quarter of 2014, he says.
Actions taken to reduce operating expenses include eliminating earlier this month “approximately 7% of the work force in the residential mortgage business,” he said.
Demchak would disclose how many people were laid off. “We do not break down the numbers. The 7% is as far as we can go with that,” said a PNC spokeswoman.
Most of the reductions affected mortgage servicing staff in four major mortgage operations and servicing centers located in Pittsburgh, Downwers Grove, Ill., Jacksonville, Fla., and Miamisburg, Ohio. Some sales staff also were laid off, she said.
Other efficiency-driven measures during the third quarter, however, have already started to affect the bottom line.
The company is reporting net income of $1 billion for the third quarter, down from $1.1 billion in the previous quarter.
Third-quarter residential mortgage banking revenue declines were in part offset by improved provisions for residential mortgage repurchase obligations and higher net hedging gains on residential mortgage servicing rights.
However, noninterest income declined $120 million compared with the second quarter due in part to a decrease in residential mortgage loan sales revenue by lower gain-on-sale margins and lower origination volume.
Overall credit quality continued to improve during the third quarter, albeit at a slower pace as nonperforming assets declined 4% to $3.6 billion at Sept. 30.
The focus on expense management helped reduce quarterly noninterest expenses by $11 million to $2.4 billion for the third quarter. As a result the provision for credit losses declined to $137 million for the third quarter, down from $157 million for the second quarter.
Going forward, PNC plans to further improve overall credit quality and abide to its “disciplined expense management strategy,” Demchak says. “We see the need for expense control across all channels.”
