By Jaiveer Shekhawat
(Reuters) -PNC Financial Services Group said on Friday it is cutting about 4% of its workforce and reported a drop in third-quarter profit, as a surge in funding costs offset higher interest from its assets.
The bank also forecast its net interest income (NII) - the difference between what banks earn on loans and pay out on deposits - to drop 1% to 2% from current levels in the fourth quarter. Its third-quarter NII also fell 3% on a sequential basis.
The outlook contrasts with upbeat forecasts from bigger peers JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo, as lenders benefit from the U.S. Federal Reserve's aggressive interest rate hikes.
Shares of Pittsburgh-based PNC were last down 2.4% in choppy trading.
The bank said the layoffs started on Oct. 6 and would be nearly complete by the end of the fourth quarter, adding that the cuts would reduce its annual personnel expenses by about $325 million, or 5%.
"They (PNC) recognize that there is definitely a headwind to the growth and their net interest income, mainly due to the higher deposit rates and higher funding costs," said Timothy Coffey, an analyst at Janney Montgomery Scott.
"And so they're trying to alleviate some of that headwind by doing what they can to cut their own non-interest expenses as a way to maintain their earnings," he said.
The bank expects its total core noninterest expense for the fourth quarter to be up 3% to 4%, which excludes charges related to the workforce reduction.
Average deposits at the bank fell 3.8%, to $422.5 billion, in the third quarter.
The bank reported quarterly profit of $3.60 per share, compared with $3.78 a year earlier, but beating analysts' average estimate of $3.11, according to LSEG IBES data.
Revenue declined 5.7% to $5.23 billion, missing the estimate of $5.32 billion.