On Aug 22, 2014, we issued an updated research report on The PNC Financial Services Group, Inc. (PNC). The Pennsylvania-based banking giant is driving operational efficiency through cost containment.
During 2013, management achieved more than $775 million in expense savings, outpacing the target of $700 million. Though non-interest expenses for the second-quarter 2014 reflects a modest rise from the previous quarter due to seasonality, the first half of 2014 witnessed a 4% year-over-year decline.
Management intends to remain focused on its cost control measures and expects non-interest expenses to further decline in 2014.
Owing to the Federal Reserve’s approval of its capital plan, the company increased the cash dividend on common stock to 48 cents per share, up 9% from the prior dividend. Also, it has announced a share repurchase program of up to $1.5 billion. The latest capital deployment structure makes it attractive to income-seeking investors.
We believe such capital deployment activities will continue to boost investors’ confidence in the stock.
Further, PNC Financial has been growing organically with the help of its financial strength. As of Jun 30, 2014, total loans increased 6% year over year and total deposits rose 5%.
However, litigation issues and the prevailing stringent regulatory landscape will continue to mar PNC Financial’s growth. Further, management expects net interest income to modestly decrease owing to the continued decline in purchase accounting accretion and interest rate spread compression.
Analysts’ mixed stance on the stock was reflected in the estimate revisions over the past 30 days. For 2014, the Zacks Consensus Estimate remained stable at $7.16 per share. It moved up marginally to $7.43 per share for 2015.
PNC Financial currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked stocks in the finance space include Select Bancorp, Inc. (SLCT), Piper Jaffray Companies (PJC) and Arlington Asset Investment Corp. (AI). All these stocks sport a Zacks Rank #1 (Strong Buy).