PNC Financial Services Group (PNC) announced yesterday that it is coming back to its prior compensation policies meant for its executives. This announcement comes after the company last month freed itself from the Troubled Asset Repurchase Program (TARP).
In August of last year, the company increased the salary of five of its senior executives entirely in the form of stock units to comply with the TARP requirement. This mode of compensation has been eliminated in 2010. However, for 2010, the executives will be entitled to the company’s annual incentive scheme, which calculates bonuses on the company’s operating earnings (net income minus any extraordinary items, acquisition costs and other one-time charges). Revision of incentives will be based on executives’ performance, and the executives will also have to meet specific targets.
Last month, PNC Financial redeemed $7.6 billion of preferred shares held by the U.S. Treasury. This action lifted all the restrictions that were put on the company including restrictions on executives pay. TARP had restricted salary increases and requires incentive compensation to be paid in stock instead of cash. PNC Financial Directors who had been paid in stock options in 2009 are Rohr, Johnson, Guyaux, Demchak and Shack who were awarded $1.75 million, $387,500, $765,000, $1.65 million and $495,000, respectively.
PNC Financial grew its 2009 earnings to $4.36 per share, significantly up from $2.44 per share in 2008. The company is perfectly poised to return value to the shareholders. Its acquisition of National City in Dec 2008 has clearly strengthened its position as a leading bank wealth manager and created significant growth potential in new high-net-worth and institutional markets. Cost savings from this acquisition have been greater-than-expected.
PNC Financial has a stable balance sheet. It remains core-funded, with a loan-to-deposit ratio of 84% as of Dec 31, 2009, the lowest among its peers, which implies a liquid balance sheet. PNC Financial has been profitable in every quarter since the economic downturn began in the middle of 2007.
PNC Financial had received $7.7 billion under TARP to help fund its $5.2 billion acquisition of Cleveland-based National City Corp. in Oct 2008, in exchange for 15% of its stake to the U.S. Treasury.
Other large regional banks that are yet to repay the TARP money include Fifth Third Bancorp (FITB), KeyCorp (KEY), Regions Financial Corp. (RF) and SunTrust Banks Inc. (STI).
Regional banks are finding it difficult to pay back the loan as their greater concentration in commercial property loans has seen mounting defaults. Bank of America Corp. (BAC), Wells Fargo (WFC) and Citigroup Inc. (C) have repaid their bailout funds and freed themselves to set their own policies on executive pay.
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Read the full analyst report on “C”
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