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What's in the Offing For PNC Financial (PNC) in Q4 Earnings?

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PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report fourth-quarter and 2021 earnings, before the opening bell, on Jan 18. The company’s revenues and earnings are expected 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 on higher asset management revenues, service charges on deposits and corporate services. However, higher expenses and a contraction of margin were negatives.

Notably, PNC Financial has an impressive earnings surprise history. It surpassed estimates in all trailing four quarters, delivering an earnings surprise of 29.4%, on average.

The company’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for fourth-quarter earnings of $3.61 has moved marginally downward in the past week. Nonetheless, the figure indicates a 10.7% rise from the year-ago reported number. The consensus estimate for revenues is pegged at $5.10 billion, suggesting year-over-year growth of 21.3%.

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

Net Interest Income (NII): Lending activity witnessed a decent acceleration in the fourth quarter. Per the Fed’s latest data, commercial and industrial loan, real estate loan, and consumer loan portfolios remained strong in the fourth quarter. Also, as the fourth quarter is typically a seasonally-strong quarter for lending activity, this contributed to the resumption of loan growth. This is expected to have aided PNC Financial’s loan growth. The company expects average loans, excluding Paycheck Protection Program (PPP) loans, to be up modestly on a sequential basis.

Also, stimulus-driven liquidity injected in the banking system remained high, with expanding deposit balances. This, too, is anticipated to have aided NII.

The consensus estimate for NII is pegged at $2.9 billion, suggesting 18.8% year-over-year growth. This is anticipated to have been aided by a rise in the average interest-earning assets. In fact, the Zacks Consensus Estimate for average interest-earning assets of $503.1 billion for the quarter indicates a 20.9% rise over the same period.

Management expects fourth-quarter NII to increase modestly sequentially.

Non-Interest Revenues: Market-driven revenues in the fourth quarter are expected to have been propelled by the continued strength in the equity markets. Thus, asset management fees are anticipated to have been positively impacted. The consensus estimate of $253 million for asset management revenues indicates 14.5% year-over-year growth.

An improvement in the consumer spending scenario is expected to have favorably impacted card fees in the quarter. The Zacks Consensus Estimate for consumer services revenues of $504 million indicates a rise of 30.2% from the prior-year quarter’s reported number.

As the economic and business activities improved, deal-making continued at a robust 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.

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

Management predicts a 3-5% sequential decline in fee income, while other non-interest income is estimated to be $375-$425 million.

Overall, the Zacks Consensus Estimate for non-interest income is pegged at $2.2 billion, suggesting a 24.4% rise from the prior year’s reported figure.

Expenses: The bank’s continued efforts toward cost savings are anticipated to have been partially offset by higher expenses on increased business and marketing activities as businesses resume in full swing. Also, the rise in operating and integration expenses related to the BBVA USA acquisition is expected to have limited bottom-line growth.

PNC Financial aimed to reduce the stand-alone company’s expenses by $300 million in 2021. Further, BBVA USA integration expenses were projected to be $450 million in the fourth quarter.

Management expects non-interest expenses to be sequentially down 3-5%.

Asset Quality:  Card delinquency rates and commercial bankruptcies were low in fourth-quarter 2021. Given the backdrop of continued improvement in credit trends, PNC Financial is expected to have witnessed strong credit trends in the fourth quarter. Management anticipates net loan charge-offs of $100-$150 million.

Key Developments During the Quarter

PNC Financial completed the conversion of 2.6 million consumers, 9,000 employees and approximately 600 branches across Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico from BBVA USA to PNC Bank. The branches reopened on Oct 12 as PNC Bank locations.

The buyout positions PNC Financial as the fifth-largest commercial bank in the United States (in terms of assets and presence) and a national franchise, accommodating a full spectrum of products and services to retail customers and business clients.

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 this time around.

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 +3.15%.

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

Other Stocks That Warrant a Look

Fifth Fourth Bancorp (FITB - Free Report) , Citizens Financial Group, Inc. (CFG - Free Report) and Huntington Bancshares Incorporated (HBAN - Free Report) are a few other companies that you might want to consider as these have the right combination of elements to post earnings beat in their upcoming releases, per our model.

The Earnings ESP for Fifth Fourth is +0.46% and it carries a Zacks Rank #3 at present. FITB is slated to report the fourth-quarter 2021 results on Jan 20.

The Zacks Consensus Estimate for Fifth Fourth’s fourth-quarter earnings has been unchanged over the past 30 days.

Citizens Financial is scheduled to release the fourth-quarter results on Jan 19. CFG currently has a Zacks Rank #3 and an Earnings ESP of +0.12%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Citizens Financial’s fourth-quarter earnings has been unchanged over the past 30 days.

Huntington Bancshares is scheduled to release earnings on Jan 21. HBAN, which carries a Zacks Rank #3 at present, has an Earnings ESP of +2.80%.

The Zacks Consensus Estimate for Huntington Bancshares’ fourth-quarter earnings has been revised 2.1% downward over the past week.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.