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The PNC Financial Services Group (PNC) Down 6.3% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for The PNC Financial Services Group, Inc (PNC - Free Report) . Shares have lost about 6.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is The PNC Financial Services Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
PNC Financial Q2 Earnings Beat on Higher Fee Income
PNC Financial’s second-quarter 2024 earnings per share of $3.39 surpassed the Zacks Consensus Estimate of $3. In the prior-year quarter, the company reported earnings per share of $3.36.
Results were aided by a rise in fee income and higher loan balance, along with reduced expenses. However, a decline in NII and an increase in provisions for credit losses acted as a spoilsport.
Net income was $1.48 billion, down 1.5% from the prior-year quarter.
Quarterly Revenues Increase and Expenses Fall
Total quarterly revenues were $5.41 billion, up 2.2% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $5.3 billion.
Quarterly NII was $3.3 billion, which declined 5.9% from the year-ago quarter. Net interest margin (NIM) decreased 19 basis points to 2.60%.
Non-interest income increased 18.3% year over year to $2.1 billion. The improvement was driven by a rise in all the components of fee income.
Non-interest expenses totaled $3.36 billion, decreasing marginally from the year-ago figure. The decrease was a result of the company’s focus on expense management.
The efficiency ratio was 62% compared with 64% in the year-ago quarter. A fall in the efficiency ratio reflects increased profitability.
As of Jun 30, 2024, total loans were $321.4 billion, which increased slightly on a sequential basis. However, total deposits decreased 2.2% from the end of the previous quarter to $416.4 billion.
Credit Quality Deteriorates
Non-performing loans jumped 30.8% year over year to $2.5 billion.
Additionally, the company reported a provision for credit losses of $235 million in the second quarter, which surged 61% from the year-earlier quarter.
Further, net loan charge-offs were $262 million, up 35.1% year over year.
Nonetheless, the allowance for credit losses decreased nearly 1% to $5.35 billion.
Capital Position Improves & Profitability Ratios Weaken
As of Jun 30, 2024, the Basel III common equity tier 1 capital ratio was 10.2% compared with 9.5% as of Jun 30, 2023.
Return on average assets and average common shareholders’ equity were 1.05% and 12.16%, respectively, compared with 1.08% and 13.01% witnessed in the prior-year quarter.
Capital Distribution Activity
In the second quarter of 2024, PNC Financial returned $0.7 billion of capital to shareholders. This included $0.6 billion in common stock dividends and $0.1 billion in common share repurchases.
Further, following the clearance of the 2024 stress test, on Jul 2, PNC’s board of directors approved a 3.2% increase in common stock dividend to $1.60 per share.
Outlook
Third-Quarter 2024
The company expects average loans to remain stable from the second quarter’s reported figure of $319.9 billion.
Management anticipates NII to rise a 1-2% from $3.3 billion reported in the second quarter of 2024.
Fee income is expected to rise 1-2% from $1.77 billion reported in the second quarter of 2024.
Other non-interest income is projected between $150 million and $200 million compared with $332 million reported in the second quarter of 2024.
Adjusted non-interest expenses are envisioned to increase 3-4% from $3.2 billion reported in the second quarter of 2024.
Net charge-offs are estimated between $250 million and $300 million compared with the second-quarter 2024 reported figure of $262 million.
Full-Year 2024
Average loans are expected to be down less than 1% from $323.5 billion in 2023.
Management suggests the top line to be down 1-2% from the $21.49 billion reported in 2023. NII is anticipated to decline approximately 4% from $13.91 billion. Management expects the Fed to cut rates twice in 2024, with a 25-basis point decrease in September and another in December.
Non-interest income (excluding visa gain and securities losses) is projected to be up 3-5% from $7.57 billion reported in 2023. Management lowered the current guidance due to ongoing softness in mortgage activity and, to a lesser extent, loan-related capital market fees.
Adjusted non-interest expenses (Excluding FDIC special assessment and PNC foundation contribution expense) are forecasted to be down approximately 1% from the reported figure of $13.34 billion in 2023, due to an increased CIP target.
The effective tax rate is estimated to be 18.5%, whereas the company reported 16.2% in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, The PNC Financial Services Group has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, The PNC Financial Services Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
The PNC Financial Services Group is part of the Zacks Banks - Major Regional industry. Over the past month, The Bank of New York Mellon Corporation (BK - Free Report) , a stock from the same industry, has gained 0%. The company reported its results for the quarter ended June 2024 more than a month ago.
The Bank of New York Mellon reported revenues of $4.6 billion in the last reported quarter, representing a year-over-year change of +3.2%. EPS of $1.51 for the same period compares with $1.38 a year ago.
For the current quarter, The Bank of New York Mellon is expected to post earnings of $1.37 per share, indicating a change of +7.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.9% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for The Bank of New York Mellon. Also, the stock has a VGM Score of F.
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The PNC Financial Services Group (PNC) Down 6.3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for The PNC Financial Services Group, Inc (PNC - Free Report) . Shares have lost about 6.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is The PNC Financial Services Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
PNC Financial Q2 Earnings Beat on Higher Fee Income
PNC Financial’s second-quarter 2024 earnings per share of $3.39 surpassed the Zacks Consensus Estimate of $3. In the prior-year quarter, the company reported earnings per share of $3.36.
Results were aided by a rise in fee income and higher loan balance, along with reduced expenses. However, a decline in NII and an increase in provisions for credit losses acted as a spoilsport.
Net income was $1.48 billion, down 1.5% from the prior-year quarter.
Quarterly Revenues Increase and Expenses Fall
Total quarterly revenues were $5.41 billion, up 2.2% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $5.3 billion.
Quarterly NII was $3.3 billion, which declined 5.9% from the year-ago quarter. Net interest margin (NIM) decreased 19 basis points to 2.60%.
Non-interest income increased 18.3% year over year to $2.1 billion. The improvement was driven by a rise in all the components of fee income.
Non-interest expenses totaled $3.36 billion, decreasing marginally from the year-ago figure. The decrease was a result of the company’s focus on expense management.
The efficiency ratio was 62% compared with 64% in the year-ago quarter. A fall in the efficiency ratio reflects increased profitability.
As of Jun 30, 2024, total loans were $321.4 billion, which increased slightly on a sequential basis. However, total deposits decreased 2.2% from the end of the previous quarter to $416.4 billion.
Credit Quality Deteriorates
Non-performing loans jumped 30.8% year over year to $2.5 billion.
Additionally, the company reported a provision for credit losses of $235 million in the second quarter, which surged 61% from the year-earlier quarter.
Further, net loan charge-offs were $262 million, up 35.1% year over year.
Nonetheless, the allowance for credit losses decreased nearly 1% to $5.35 billion.
Capital Position Improves & Profitability Ratios Weaken
As of Jun 30, 2024, the Basel III common equity tier 1 capital ratio was 10.2% compared with 9.5% as of Jun 30, 2023.
Return on average assets and average common shareholders’ equity were 1.05% and 12.16%, respectively, compared with 1.08% and 13.01% witnessed in the prior-year quarter.
Capital Distribution Activity
In the second quarter of 2024, PNC Financial returned $0.7 billion of capital to shareholders. This included $0.6 billion in common stock dividends and $0.1 billion in common share repurchases.
Further, following the clearance of the 2024 stress test, on Jul 2, PNC’s board of directors approved a 3.2% increase in common stock dividend to $1.60 per share.
Outlook
Third-Quarter 2024
The company expects average loans to remain stable from the second quarter’s reported figure of $319.9 billion.
Management anticipates NII to rise a 1-2% from $3.3 billion reported in the second quarter of 2024.
Fee income is expected to rise 1-2% from $1.77 billion reported in the second quarter of 2024.
Other non-interest income is projected between $150 million and $200 million compared with $332 million reported in the second quarter of 2024.
Adjusted non-interest expenses are envisioned to increase 3-4% from $3.2 billion reported in the second quarter of 2024.
Net charge-offs are estimated between $250 million and $300 million compared with the second-quarter 2024 reported figure of $262 million.
Full-Year 2024
Average loans are expected to be down less than 1% from $323.5 billion in 2023.
Management suggests the top line to be down 1-2% from the $21.49 billion reported in 2023. NII is anticipated to decline approximately 4% from $13.91 billion. Management expects the Fed to cut rates twice in 2024, with a 25-basis point decrease in September and another in December.
Non-interest income (excluding visa gain and securities losses) is projected to be up 3-5% from $7.57 billion reported in 2023. Management lowered the current guidance due to ongoing softness in mortgage activity and, to a lesser extent, loan-related capital market fees.
Adjusted non-interest expenses (Excluding FDIC special assessment and PNC foundation contribution expense) are forecasted to be down approximately 1% from the reported figure of $13.34 billion in 2023, due to an increased CIP target.
The effective tax rate is estimated to be 18.5%, whereas the company reported 16.2% in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, The PNC Financial Services Group has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, The PNC Financial Services Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
The PNC Financial Services Group is part of the Zacks Banks - Major Regional industry. Over the past month, The Bank of New York Mellon Corporation (BK - Free Report) , a stock from the same industry, has gained 0%. The company reported its results for the quarter ended June 2024 more than a month ago.
The Bank of New York Mellon reported revenues of $4.6 billion in the last reported quarter, representing a year-over-year change of +3.2%. EPS of $1.51 for the same period compares with $1.38 a year ago.
For the current quarter, The Bank of New York Mellon is expected to post earnings of $1.37 per share, indicating a change of +7.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.9% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for The Bank of New York Mellon. Also, the stock has a VGM Score of F.