It has been about a month since the last earnings report for The PNC Financial Services Group, Inc (PNC Quick QuotePNC - Free Report) . Shares were flat in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent trend continue leading up to its next earnings release, or is The PNC Financial Services Group, Inc due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PNC Financial Q4 Earnings & Revenues Top Estimates

PNC Financial pulled off pulled off a fourth-quarter 2021 positive earnings surprise of 1.94% on substantial recapturing of credit losses. Earnings per share, as adjusted (excluding pre-tax integration costs related to the BBVA USA acquisition), of $3.68 surpassed the Zacks Consensus Estimate of $3.61 and improved 12.5% year over year.

Fee income growth on higher asset management revenues and corporate services were tailwinds. However, higher expenses, margin contraction and a decline in loans dragged results.

Net income for the fourth quarter was $1.31 billion, lower than $1.46 billion in the prior-year quarter.

Results for 2021 include the BBVA USA operations beginning Jun 1, 2021. In 2021, net income was $5.73 billion, up from the prior year’s $3 billion. Yearly earnings per share, as adjusted, of $14.18 lagged the Zacks Consensus Estimate of $15.85 but improved 122.6% from 2020.

Quarterly Revenues Improve on Fee Income Growth, Expenses Rise

Total revenues in the reported quarter were $5.13 billion, up 22% year over year. The top line surpassed the Zacks Consensus Estimate of $5.10 billion.

In 2021, revenues were a record $19.21 billion, up 13.7% year over year. The top line, however, missed the Zacks Consensus Estimate of $19.24 billion.

NII improved 18% from the year-ago quarter to $2.86 billion. The upswing is attributable to higher interest-earning assets, partially offset by lower securities yields. However, the NIM contracted 5 basis points to 2.27%, reflecting lower securities yields.

Non-interest income grew 27% year over year to $2.65 billion on higher asset management, corporate services, consumer service revenues and residential mortgage revenues, offset by a decline in income from service charges on deposits.

PNC Financial’s non-interest expenses totaled $3.79 billion, up 40% from the year-ago figure. The rise primarily resulted from the rise in operating and integration expenses related to the BBVA USA acquisition as well as increased business activities. The efficiency ratio was 74% compared with 64% in the year-ago quarter. A higher efficiency ratio indicates lower profitability.

As of Dec 31, 2021, total loans were marginally down sequentially to $288.4 billion. Total deposits increased 1.9% to $457.3 billion.

Credit Quality Decent

The company reported the recapture of credit losses of $327 million compared with the recapture of $254 million in the year-earlier quarter. The allowance for loan and lease losses declined 9.2% to $4.87 billion on a year-over-year basis. However, net loan charge-offs were $124 million, up 53% year over year. Non-performing loans increased 8% year over year to $2.48 billion.

Capital Position Weak, Profitability Ratios Decline

As of Dec 31, 2021, the Basel III common equity tier 1 capital ratio was 10.2% compared with 12.2% as of Dec 31, 2020.

Return on average assets and average common shareholder’ equity were 0.92% and 9.61%, respectively, compared with 1.24% and 11.16% witnessed in the prior-year quarter.

Capital Deployment Activity

In the fourth quarter of 2021, PNC Financial returned $1.1 billion capital to shareholders through dividends on common shares of $0.5 billion and 2.9 million share repurchases amounting to $0.6 billion.

Outlook

Here’s the first-quarter 2022 outlook relative to fourth-quarter 2021:

The company expects average loans, excluding Paycheck Protection Program (PPP) loans, to be up 1-2%. Management anticipates NII to be down 1-2%. Fee income is expected to decrease 4-6%. With this, the top line is projected to fall 3-5%. Other non-interest income of $375-$425 million is projected. Non-interest expenses (excluding integration expenses) are expected to be sequentially down 4-6%. Net loan charge-offs are estimated to be $100-$150 million.

Here’s the 2022 outlook relative to 2021:

The company expects average loans and period-end loans to be up 10% and 5%, respectively. Management expects revenues to increase 8-10%. Non-interest expenses (excluding integration expenses) are expected to be up 4-6%. The effective tax rate is projected to be 18% compared with 18.1% in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -5.42% due to these changes.

VGM Scores

Currently, The PNC Financial Services Group, Inc has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, The PNC Financial Services Group, Inc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.