Mortgage Earnings Roundup: CIT Hit By Home Lending Exit, Regionals Mixed

A slew of mortgage industry-related earnings were put out Thursday; HW rounds up a few so you don’t have to. CIT sees red CIT Group (CIT) reported a second quarter loss of $2.08 billion, or $7.88 a share, up dramatically from a $257 million loss, or $1.35 a share, in the year-ago period. The culprit was primarily the commercial finance firm’s exit from home lending, which led to a $2.1 billion hit in earnings this quarter. Company execs say that the pain of mortgages is now behind them; CEO Jeffrey Peek said the sale “eliminated a major area of risk and uncertainty.” Shares in the company jumped 17 percent as part of a broader financial rally, up to $8.47 by market close. PNC, Huntington beat expectations On the plus side, PNC Financial Services Group (PNC), based in Pittsburgh, saw net income increase to $505 million, or $1.45 per share, up from a net of $423 million, or $1.22 per share, one year earlier. The company earned as much in the first six months of this year as it did last year — no small feat for any bank in the current environment. Despite the earnings, deterioration in the bank’s residential real estate development portfolio is growing; net charge-offs grew to $112 million in the quarter, up from $98 million one quarter earlier and more than four times the level recorded one year earlier. Non-performing assets rose to $733 million, or one percent of total loans — up from a .87 percent ration one quarter earlier. Allowance for loan and lease losses has been steadily sliding, as well, falling from 151 percent of NPAs at the end of March to 142 percent at June 30; a good number, to be sure, but one that has been slipping consistently — last year, the loan loss allowance stood at 303 percent of NPAs. Investors rewarded the company’s shares by pushing them up 13.5 percent to $65.75, nonetheless. Shares in Columbus, Ohio-based Huntington Bancshares Inc. (HBAN) rallied to close up a stunning 35.7 percent on the day after the bank said that earnings rose 26 percent to $101.4 million, or $.25 per share. The results mark the second straight quarter that the company has topped analyst estimates. A large chunk of the earnings came as the bank saw a 41 percent decrease in non-performing assets due to improvement in restructured loans made to Franklin Credit Management Corp. Despite the rally, the bank cautioned that things may not look so rosy going forward — expected higher credit provisions being one factor in what the bank characterized as a “weak” economic environment. Q2 credit loss provisions doubled to $120.8 million compared to one year ago, and also rose from the $88.7 million in the first quarter. There also the issue of the bank’s $1.1 billion remaining exposure to Franklin Credit, which had fallen on tough times recently amid the mortgage market’s collapse. BB&T, Comerica miss the mark Not all regionals fared well, however; those with sizable construction lending portfolios tended to show the effects of a real estate market gone south. North Carolina-based BB&T Corp. (BBT) said that second quarter net income fell 6.6 percent to $428 million, or $.78 per diluted share, as the regional bank provisioned $330 million for credit losses — triple the provision charge recorded one year earlier. But the bank increased its dividend anyway, with CEO John Allison citing “a long history of dividend increases.” The increased payout comes despite NPAs that jumped to .95 percent of total assets and the end of June, roughly triple year-ago levels. Shares rose 12.8 percent to close at $27.63 on the news anyway. Go figure. Dallas-based Comerica Inc. (CMA) saw net income decline as well, dropping to $56 million, or $0.37 per share, from $196 million, or $1.25 per share, one year ago. The bank set aside $177 in provision for credit losses as its residential construction loan portfolio continued to face difficulties (much of it in California). NPAs jumped to 1.44 percent of total loans, up sharply from 1.07 percent just one quarter earlier and well above the 0.53 percent ratio booked in the second quarter of 2007. Disclosure: The author held no direct positions the firms mentioned herein when this story was written, although indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.