Oct. 23--PNC Financial Services Group Inc.'s stock soared Tuesday after it reported that third-quarter profits more than doubled to $559 million from a year earlier, a sign the economy and loan performance are stabilizing, the bank's CEO said.

"We're beginning to see signs the rate of credit deterioration has eased," said CEO James Rohr on a conference call with analysts. He said the Pittsburgh bank's results "continued to demonstrate its resiliency in the economic downturn."

The earnings report, which beat Wall Street estimates by a wide margin, compared with a profit $259 million last year. Per-share earnings jumped to $1 from 70 cents a year ago. Analysts had expected results to equal 28 cents, according to a poll by Bloomberg.

PNC stock closed at $50.65 yesterday, up $5.69, or 12.7 percent.

The results were mainly fueled by profitable lending, as net interest income more than doubled to $2.2 billion. The increase more than offset the $914 million PNC set aside to cover possible loan losses, dwarfing the $190 million last year, but down from $1.1 billion in the April-June quarter.

PNC wrote off $650 million in bad loans during the quarter. That was higher than the $122 million is wrote off a year earlier but lower than the $795 million it wrote off in the second quarter.

"That was better than many of PNC's peers, which showed similar or more stress" in their loan portfolios, said Terry McEvoy, an analyst for Oppenheimer & Co. Inc. of New York.

"It's premature for PNC to declare victory on the problem loan portfolio, but they're getting there," said Gerard Cassidy, analyst at RBC Capital Markets of Portland, Maine.

The results include those of National City Corp., which PNC acquired in December. The Cleveland bank contributed significantly to earnings yesterday and should help PNC going forward, said McEvoy.

"The numbers were extremely strong, well above expectations," said the analyst. "What's driving it to a large degree is National City."

National City had suffered from subprime loans on its balance sheet, but PNC took about $12 billion in loan losses up front to put much of the pain behind it, said analysts. In addition, the higher-paying deposits that National City had at deal time are gradually repricing downward, said analysts, lowering PNC's interest costs significantly.

PNC will rebrand National City's sizable home mortgage business to "PNC Mortgage" in November. Rohr said PNC aims to become "a top-10 mortgage lender," as well as to deepen PNC's banking relationships with National City customers.

Rohr said National City was poor at cross-selling its products and services, which represents an opportunity for PNC.

PNC will convert 101 National City branches in the Pittsburgh region to PNC over the Nov. 7-8 weekend, along with other National City businesses. Remaining branches will convert by June, giving PNC 2,708 branches with about $184 billion in deposits, the nation's fifth-most.

Thomas Olson can be reached via e-mail or at 412-320-7854.

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