Balanced View on PNC Financial
On Mar 6, 2013, we reiterated our long-term recommendation on PNC Financial Services Group Inc. (PNC) at Neutral based on its diverse revenue mix, balance sheet strengthening efforts, strategic acquisitions and solid capital levels. However, a tepid economic recovery with continued low interest rate environment and increased regulatory headwinds are our concerns.
Why Neutral?
PNC Financial’s fourth quarter 2012 adjusted earnings per share of $1.71 significantly exceeded the Zacks Consensus Estimate of $1.37. However, results were below the earnings per share of $1.74 recorded in the prior quarter.
Better-than-expected results reflect improved net interest income. Moreover, lower nonperforming assets, reduced charge-offs along with healthy capital levels were the positives.
However, PNC Financial’s non-interest expense was $2.8 billion, up 7% from the last quarter. The hike reflected increase in personnel costs along with increased expenses for residential mortgage foreclosure-related matters. Further, PNC Financial’s provision for credit losses was $318 million, up 39% sequentially. This was mainly attributable to a larger loan portfolio and reduced reserve release in commercial lending.
Over the last 7 days, the Zacks Consensus Estimate for 2013 and 2014 remained stable at $6.58 and $6.86 per share, respectively. With the Zacks Consensus Estimates remaining constant, the company retains a Zacks Rank #3 (Hold).
Other Major Banks to Consider
Among peers of PNC Financial, BankUnited Inc. (BKU) holds a Zacks Rank #1 (Strong Buy), while Fifth Third Bancorp (FITB) and State Street Corporation (STT) retain a Zacks Rank #2 (Buy).
Read the Full Research Report on PNC
Read the Full Research Report on FITB
Read the Full Research Report on STT
Read the Full Research Report on BKU
More From Zacks.com
