Dividend reduction upsets PNC Financial shareholders

Apr 29, 2009 (Pittsburgh Post-Gazette - McClatchy-Tribune Information Services via COMTEX) -- PNC | Quote | Chart | News | PowerRating -- If PNC Financial Services Group's annual meeting Tuesday was any barometer, shareholders are reeling over the bank's recent decision to slash the quarterly dividend.

"A lot of shareholders depend on the dividends to live on," longtime stockholder Lois Kreitzer complained to PNC CEO Jim Rohr at the bank's Downtown Pittsburgh headquarters.

"I made a lot of money on your stock and gave a lot away to charity. But I liked those dividends," another elderly stockholder commented.

"I could accept the stock [price] going down," said another shareholder. "But you destroyed the dividend. That kind of bothered me."

Mr. Rohr said the board's decision to cut the dividend 85 percent -- from 66 cents a share to 10 cents -- was "very, very difficult" but "prudent," given the pressure for banks to preserve capital in the stressed economy. The move announced in March is expected to save PNC $1 billion annually.

Bank of New York Mellon, JP Morgan Chase and Citigroup are among other big banks that have cut their dividends in the midst of the financial crisis.

"I would hope as the economy recovers so will our dividend at that time," Mr. Rohr said.

Shareholder activist Evelyn Y. Davis, in town from Washington, D.C., did not complain about the dividend but took some 15 minutes to grill Mr. Rohr on a variety of subjects, including whether the government had pressured PNC into buying troubled Cleveland-based National City Corp.

"No, they did not," Mr. Rohr said.

Ms. Davis, who was given special permission to speak at the beginning of the meeting instead of waiting for the normal question-and-answer session at the end, also asked Mr. Rohr why PNC accepted $7.7 billion in government bailout money even though the bank "didn't really need it."

PNC, which is the nation's fifth largest bank and which last week reported first-quarter profits rose 22 percent from a year earlier, did what regulators encouraged it to do, Mr. Rohr said.

He said PNC was told that if it did not take the money, "we could be perceived as a weak bank." At the time, he said, "it was believed only the strong banks" would receive government funds.

He said he was waiting for the final results of stress tests that the government is conducting on the nation's 19 largest financial institutions before deciding when PNC might repay the taxpayer money.

The Obama administration has said it would make the findings of the tests public on Monday.

The examinations were intended to identify banks that must raise more capital to survive a more dramatic and prolonged downturn.

Ms. Davis, a fixture at annual meetings for years, also criticized PNC directors who do not own at least 1,000 shares of the bank's stock, adding that she hoped those directors would ante up for more.

"After all, our stock is selling at a bargain rate," she said.

She also wanted to know if PNC had any so-called toxic assets that the government might buy.

"We have some assets worth less than others, that's for sure," Mr. Rohr replied, drawing chuckles from the audience.

In the end, the inveterate gadfly paused to compliment Mr. Rohr.

"You are one of the very best executives I've ever dealt with," Ms. Davis said. "A role model for other corporations."

Also at the meeting, shareholders defeated a shareholder proposal that would have required PNC's highest paid executives to retain 75 percent of shares acquired as compensation for at least two years after leaving the company, to better align their interests with shareholders and motivate them to focus on the company's long-term success.

Ms. Davis had spoken in favor of the proposal, saying it was "a sensible thing."

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