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What's in the Offing for PNC Financial's (PNC) Q3 Earnings?

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PNC Financial (PNC - Free Report) is scheduled to report third-quarter 2021 earnings, before the opening bell, on Oct 15. The company’s revenues and earnings are likely to have witnessed year-over-year increases.

In the last-reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on fee income growth aided by higher asset management revenues. However, higher expenses and a contraction of margin were negatives.

Notably, PNC Financial has an impressive earnings surprise history. It surpassed estimates in all of the trailing four quarters, delivering an earnings surprise of 44.18%, on average.

The company’s activities in the to-be-reported quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $3.64 has moved up 3.4% in the past 30 days. Also, the figure indicates a 7.37% rise from the year-ago reported figure. The consensus estimate for revenues is pegged at $5.03 billion, suggesting growth of 17.61% year over year.

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

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 mayhem. This is likely to have substantially hurt the net interest margin and NII.

Also, per the Fed’s latest data, the loan balance is expected to have been affected by a fall in commercial & industrial on a sequential basis.

Nonetheless, there has been a sequential rise in consumer and real estate loans in the to-be reported quarter. Management expects period-end loans to be up modestly and NII to increase in the mid-teens, sequentially.

Accordingly, the consensus estimate for NII is $2.9 billion, suggesting a 15.4% rise sequentially. This is likely to have been aided by an expected rise in the average interest-earning assets. In fact, the Zacks Consensus Estimate for average interest earning assets of $506.8 billion for the quarter indicates a 12.4% sequential rise.

Non-Interest Revenues: The quarter witnessed continued strength in equity markets, which is likely to have provided an additional boost to market-driven revenues. Thus, asset management fee is anticipated to have been positively impacted. The consensus estimates of $249 million for asset management revenues indicates 4.2% growth sequentially.

A decent consumer spending scenario might have favorably impacted card fees during the quarter. The Zacks Consensus Estimate for consumer services revenues of $485 million indicates a rise of 6% from the prior-quarter reported number.

As the economic and business activities resumed, deal making continued at a record pace in the to-be-reported quarter. Thus, with an increase in global merger and acquisition volumes, the company’s corporate service fees are likely to have been positively impacted.

The IPO activities were high during the to-be-reported quarter. Also, as companies continued to build liquidity, there was a rise in follow-up equity and debt issuances. Hence, growth in PNC Financial’s underwriting fees is likely to have been decent in the third quarter. The consensus estimate for the company’s corporate services fees indicates a marginal rise on a sequential basis.

Management predicts a rise in fee income in the mid-single digits sequentially, while other non-interest income is estimated to be $325-$375 million.

However, the rising mortgage rates during the third quarter are likely to have reduced refinancing activities, along with fall in new originations. Thus, these factors are expected to have abated PNC Financial’s mortgage banking fees during the to-be-reported quarter.

Overall, the Zacks Consensus Estimate for non-interest income is $2.08 billion, suggesting a marginal decline sequentially.

Expenses: The bank’s continued efforts toward cost savings might have been partially offset by its digital expansion efforts. Notably, management expects non-interest expenses to be sequentially up in the high-single-digit range.

Asset Quality: Improvement in credit trends and reserve releases are likely to continue. Although there might be an impact of the rising delta-variant Covid-19 cases, the unprecedented amount of stimulus pumped into the U.S. economy is likely to have been supportive. Management anticipates net loan charge-offs of $150-$200 million.

Now, let’s have a look at what our quantitative model predicts:

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 +2.16%.

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

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider as these have the right combination of elements to post earnings beats in their upcoming releases, per our model.

The Earnings ESP for JPMorgan (JPM - Free Report) is +0.60% and the stock carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2021 results on Oct 13.

BankUnited, Inc. (BKU - Free Report) is scheduled to release third-quarter results on Oct 21. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +1.90%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

U.S. Bancorp (USB - Free Report) is scheduled to release earnings on Oct 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.38%.