We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Reasons to Hold on to PNC Financial (PNC) Stock For Now
Read MoreHide Full Article
The PNC Financial Services Group, Inc. (PNC - Free Report) has been benefiting from strong balance sheet, inorganic expansion and sound capital deployment activities. However, rising operating expenses and declining net interest margins (“NIM”) are concerns.
PNC Financial remains committed toward developing its business through strategic initiatives. In 2021, the company converted BBVA USA customers and employees to its network and platforms. Further, it has boosted its foothold as a commercial bank in all top 30 markets of the United States and strengthened its distribution and capabilities. Notably, PNC Financial is likely to support its bottom line through planned investments and diversification of its business mix.
Moreover, PNC Financial stands solid from the balance-sheet perspective. Its loans and deposits have witnessed a three-year CAGR (2019-2021) of 9.7% and 25.9%, respectively. Solid economic growth and improving consumer spending trends are expected to continue toboost the balance sheet. Management expects 2022 average loans and period-end loans to be up 10% and 5%, respectively, on a sequential basis.
With increased yields and growth in loan balances, net interest income (“NII”) for the bank has witnessed a four-year compound annual growth rate ("CAGR"), ended 2021, of 3.1%. Lower deposit costs, along with higher securities yields, partly offset by reduced loan yields led to the growth of NII.
PNC Financial continues to progress with its capital deployment strategy. In July 2021, the company sequentially hiked the quarterly cash dividend on the common stock by 9%. Further, in the fourth quarter of 2021, it returned $1.1 billion of capital to its shareholders through dividends and share buyback. Given the company’s earnings strength and favorable debt/equity ratio, its capital-deployment activities seem sustainable.
However, PNC Financial’s expenses flared up at a four-year CAGR (2018-2021) of 9.2%. This aside, the company incurred significant integration costs related to the acquisition of BBVA USA in both 2020 and 2021, and expects additional expenses in the ongoing year. Though the company aims at cost containment, a rising expense base is likely to keep eroding the bottom line in the near term.
NIM declined from 2019 through 2021 on account of low interest rates and security yields. Further, the overall low-interest-rate environment is expected to keep margins under pressure in the near term.
Additionally, the company’s loan portfolio consists of nearly 67% of commercial loans. Such high exposure to commercial loans depicts lack of diversification, which can be risky amid the challenging economy and competitive markets.
Currently, PNC Financial carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have gained of 2.4% compared to 0.7% gain recorded by the industry.
Over the past six months, shares of First Business have jumped 18.1%, whereas those of UBS and BOH have gained 7.3% and 0.7%, respectively.
Over the past 60 days, the Zacks Consensus Estimate for First Business’ current-year earnings has been revised 9% upward, while that for UBS has moved 11.9% north. Current-year earnings estimates for Bank of Hawaii have moved 2.9% up over the past two months.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Reasons to Hold on to PNC Financial (PNC) Stock For Now
The PNC Financial Services Group, Inc. (PNC - Free Report) has been benefiting from strong balance sheet, inorganic expansion and sound capital deployment activities. However, rising operating expenses and declining net interest margins (“NIM”) are concerns.
PNC Financial remains committed toward developing its business through strategic initiatives. In 2021, the company converted BBVA USA customers and employees to its network and platforms. Further, it has boosted its foothold as a commercial bank in all top 30 markets of the United States and strengthened its distribution and capabilities. Notably, PNC Financial is likely to support its bottom line through planned investments and diversification of its business mix.
Moreover, PNC Financial stands solid from the balance-sheet perspective. Its loans and deposits have witnessed a three-year CAGR (2019-2021) of 9.7% and 25.9%, respectively. Solid economic growth and improving consumer spending trends are expected to continue toboost the balance sheet. Management expects 2022 average loans and period-end loans to be up 10% and 5%, respectively, on a sequential basis.
With increased yields and growth in loan balances, net interest income (“NII”) for the bank has witnessed a four-year compound annual growth rate ("CAGR"), ended 2021, of 3.1%. Lower deposit costs, along with higher securities yields, partly offset by reduced loan yields led to the growth of NII.
PNC Financial continues to progress with its capital deployment strategy. In July 2021, the company sequentially hiked the quarterly cash dividend on the common stock by 9%. Further, in the fourth quarter of 2021, it returned $1.1 billion of capital to its shareholders through dividends and share buyback. Given the company’s earnings strength and favorable debt/equity ratio, its capital-deployment activities seem sustainable.
However, PNC Financial’s expenses flared up at a four-year CAGR (2018-2021) of 9.2%. This aside, the company incurred significant integration costs related to the acquisition of BBVA USA in both 2020 and 2021, and expects additional expenses in the ongoing year. Though the company aims at cost containment, a rising expense base is likely to keep eroding the bottom line in the near term.
NIM declined from 2019 through 2021 on account of low interest rates and security yields. Further, the overall low-interest-rate environment is expected to keep margins under pressure in the near term.
Additionally, the company’s loan portfolio consists of nearly 67% of commercial loans. Such high exposure to commercial loans depicts lack of diversification, which can be risky amid the challenging economy and competitive markets.
Currently, PNC Financial carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have gained of 2.4% compared to 0.7% gain recorded by the industry.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the banking space are First Business Financial Services (FBIZ - Free Report) , UBS Group AG (UBS - Free Report) and Bank of Hawaii (BOH - Free Report) . At present, FBIZ and UBS both sport a Zacks Rank #1 (Strong Buy), while BOH carries a Zacks Rank #2 (Buy). You can see see the complete list of today’s Zacks #1 Rank stocks here.
Over the past six months, shares of First Business have jumped 18.1%, whereas those of UBS and BOH have gained 7.3% and 0.7%, respectively.
Over the past 60 days, the Zacks Consensus Estimate for First Business’ current-year earnings has been revised 9% upward, while that for UBS has moved 11.9% north. Current-year earnings estimates for Bank of Hawaii have moved 2.9% up over the past two months.