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Oppenheimer sees strong second half at PNC

NEW YORK (AP) -- The acquisition earlier this year of the U.S. retail division of Royal Bank of Canada by PNC Financial Services Group will soon begin to pay off, according to Oppenheimer & Co., which upgraded the Pittsburgh bank Monday.

Oppenheimer set a 52-week price target of $75 for the fifth-largest U.S. bank by assets. The stock currently is trading at around $64, up 9 percent so far this year. PNC's $3.45 billion acquisition in March of RBC Bank (USA) is "an ideal platform" for PNC to expand its market share in the southeastern U.S., analyst Terry McEvoy wrote.

Home prices have been recovering in the key southeastern markets of Florida and Georgia, Oppenheimer points out.

Benefits from the acquisition should become more evident in the second half of the year, bringing an increase in net interest income, or income collected on loans, of 10 percent to 12 percent during the period, Oppenheimer said. In the second quarter, PNC'S net interest income jumped 17 percent, boosted by contributions from the RBC purchase.

Solid revenue and the stock's current price should outweigh the persistent pressure from government-controlled mortgage giants Fannie Mae and Freddie Mac to buy back more home mortgages. PNC's net income shrank 41 percent in the second quarter as it set aside hundreds of millions of dollars to buy back home loans. PNC and other banks have been buying back soured mortgages from investors who bought them before the 2008 financial crisis, and later accused banks of misleading them about their quality.

PNC is ahead of both larger and smaller rivals in creating financial products and capitalizing on changes in banking practices, Oppenheimer said, as it upgraded shares to "Outperform" from "Perform."

Shares of PNC Financial Services Group Inc. rose 81 cents, or 1.3 percent, to $64.61 in midday trading. They have traded between $44.74 and $67.89 over the past 52 weeks.