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PNC Financial's Ratings Affirmed by Moody's, Outlook Stable

Zacks Equity Research

Moody's Investor Service, the rating services arm of Moody's Corporation MCO, affirmed the ratings for PNC Financial Services Group, Inc. PNC and its subsidiaries. The outlook for the company remains stable.

Specifically, PNC Financial’s senior debt rating remains at A3. Its subsidiary bank, PNC Bank, N.A.’s deposit rating is Aa2/Prime-1 and a standalone baseline credit assessment (BCA) is a2. Further, its senior debt rating is A2 and subordinated debt ratings are A3. The bank’s counterparty risk assessments are A1(cr)/Prime-1(cr).

Looking at PNC Financial’s price performance, the stock gained 32.9% over the last six months, outperforming the Zacks categorized Major Regional Banks industry’s surge of 30.2%

Reasons Behind the Affirmation

The ratings are supported by the company’s sustainable business model, strong balance sheet and diverse sources of earnings. Notably, PNC Financial’s credit quality is impressive. Net charge-off rate remains low along with moderate nonperforming asset levels. Further, its energy portfolio amounts to just 1.3% of total loans.  

Moreover, its strong asset risk profile is strengthened by management’s initiatives for loan growth and limited concentration risk. PNC Financial’s deposit base, sizable cash holdings and portfolio of high quality securities support its liquidity profile.  Further, the company’s 20% stake in BlackRock, the world's largest asset manager, is considered as an advantage.

However, PNC Financial’s low net interest margin and average efficiency are reflected in its weak earnings. Also, Moody’s does not expect improvement in the company’s profits for the current year.

Factors that Can Trigger Ratings Change

PNC Financial’s standalone BCA rating can improve if it witnessed a decent improvement in earnings or capital, without any change in its risk profile.

The ratings can move downward if the company’s asset quality or profitability declines.

Are there Better Options than PNC Financial? 

Currently, PNC Financial carries a Zacks Rank #3 (Hold).

A couple of better-ranked finance stocks in the same space are Bank of Montreal BMO and KB Financial Group Inc. KB. Both these stocks sport a Zacks Rank #1 (Strong Buy). You can the complete list of today’s Zacks #1 Rank stocks here.

Bank of Montreal witnessed an upward earnings estimate revision of 4.6% for the current year in the past 60 days. Its share price jumped 24.3%, over the past one year.

KB Financial’s earnings estimates were revised upward by 4.6% for the current year in the past 30 days. Also, its share price increased 59.6%, over the last one year.

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PNC Financial Services Group, Inc. (The) (PNC): Free Stock Analysis Report
Moody's Corporation (MCO): Free Stock Analysis Report
Bank Of Montreal (BMO): Free Stock Analysis Report
KB Financial Group Inc (KB): Free Stock Analysis Report
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