PNC Financial Services Group Inc. (PNC) is the latest bank to raise its dividend and announce share buyback plans. With this move, the company joins the bandwagon of Wall Street banks that won Federal regulators approval and hike dividends following the second round of stress test results.
PNC’s board of directors declared a 250% increase in quarterly cash dividend and its intention to buy back up to $ 500 million of common stock during the remainder of 2011.
The company will now pay a quarterly cash dividend of 35 cents per share on the common stock, up 25 cents per share from the prior quarter dividend of 10 cents. The new dividend is payable on May 5, to shareholders of record at the close of business on April 18.
The share buyback would take place under its existing 25 million share repurchase program in the open market or privately negotiated transactions. Currently, the company has 24.7 million shares remaining. It has been in effect since October 4, 2007, and has no expiry date. Additionally, PNC’s board of directors declared a quarterly cash dividend on Series B, K and L preferred stock.
Last month, PNC Financial had said that the capital deployment program was approved by the Federal regulators and the announcement would ensue the company’s meeting on April 7.
The plan, which was approved by its board of directors, was submitted in January 2011 as part of the capital adequacy assessment of the 19 bank holding companies that participated in the Supervisory Capital Assessment Program.
The Fed had put restrictions on increasing banks’ dividends and share buybacks in exchange of the bailout money. The restriction was implemented to preserve capital for the banks and avoid any further credit crunch.
Following the repayment of the bailout money and capital strengthening initiatives, many banks started exerting pressure on regulators to let them hike their dividends.
This long expected decision was a major milestone for the banking sector, signaling that the enlisted banks have fully emerged from the effects of the financial crisis.These stress-free banks include Wall Street biggies such as JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and U.S. Bancorp (USB).
PNC is one of the nation's largest bank holding companies, with assets totaling $ 264.3 billion as of December 31, 2010. Its capital deployment efforts justify the company’s capital strength and its commitment to return value to shareholders.
PNC Financial currently retains its Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Further, considering the fundamentals, we are maintaining a long-term “Neutral” recommendation on the stock.
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