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Will Fee Income Growth Aid PNC Financial (PNC) Q1 Earnings?

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PNC Financial (PNC - Free Report) is scheduled to report first-quarter 2021 results on Apr 16, before market open. While its revenues might have declined year over year, earnings are likely to have improved.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on decline in costs and reserve release. However, lower revenues and loans were the undermining factors.

Nevertheless, the company’s activities in the to-be-reported quarter were adequate to win analysts’ confidence. As a result, its Zacks Consensus Estimate for earnings of $2.75 has moved up 6.6% in the past 30 days. Also, the figure indicates 41% growth from the year-ago reported number. However, the consensus estimate for sales is pegged at $4.13 billion, suggesting a decline of 8.6% year over year.

What the Zacks Model Unveils

Our proven model shows that PNC Financial has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for PNC Financial is +0.64%.   

Zacks Rank: The company currently carries a Zacks Rank of 3.

Now let’s discuss the factors that are likely to have impacted the company’s first-quarter performance:

Lower Net Interest Income (NII): The Fed continued to keep interest rates at near zero in order to shield the U.S. economy from the coronavirus outbreak-related mayhem. This is likely to have substantially hurt net interest margin and NII.

Also, per the Fed’s latest data, the loan balance is likely to have been affected by a fall in commercial & industrial, and consumer loans.

The consensus estimate for NII is $2.4 billion, suggesting 4.5% fall.

Notably, management expects average loans to decline modestly on a sequential basis in the first quarter and NII to fall 1%.

Higher Non-Interest Revenues: The quarter witnessed a rebound in the equity markets, resulting in most asset-management businesses recording net inflows during the to-be-reported quarter. Thus, asset management fee is likely to have been positively impacted. However, the sale of the company’s investment in BlackRock might have been an offsetting factor.

Also, historically low mortgage rates during the first quarter drove refinancing activities, along with growth in originations. Thus, these factors are expected to have supported PNC Financial’s mortgage banking fees in the to-be-reported quarter. Decent consumer spending scenario on easing of lockdown measures might have favorably impacted card fees.

The consensus estimate for consumer services is pegged at $383 billion, which suggests growth of 1.6% year over year.

Strong equity markets resulted in a rise in follow-up equity issuances, while global IPO activity was robust and witnessed proceeds of record levels in the first quarter. Thus, equity underwriting fees are expected to have provided some support.

Further, strong deal making momentum was witnessed as economic and business activities gradually resumed. Thus, the consensus estimate for the company’s corporate services fees indicates a rise of 3% year over year.

Moderate Decline in Expenses: The bank’s continued efforts toward cost savings might have been partially offset by its digital expansion efforts. Management expects non-interest expenses to increase 1% on a sequential basis.

Asset Quality: Management anticipates no substantial reserve builds during the first quarter. Also, the company expects net loan charge-offs in the range of $200-$250 million compared with $229 million reported in the fourth quarter.

Other Stocks That Warrant a Look

Here are a few other stocks you may want to consider, as according to our model these too have the right combination of elements to post an earnings beat this quarter.

Citigroup (C - Free Report) is slated to report quarterly results on Apr 15. The company has an Earnings ESP of +3.14% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Huntington Bancshares Incorporated (HBAN - Free Report) is +1.73% and it carries a Zacks Rank of 3, at present. The company is scheduled to report quarterly numbers on Apr 22.

New York Community Bancorp, Inc. (NYCB - Free Report) is slated to report quarterly earnings on Apr 28. The company, which carries a Zacks Rank of 2 (Buy) at present, has an Earnings ESP of +2.02%.

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