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Key Factors to Impact PNC Financial's (PNC) Q1 Earnings
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PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report first-quarter 2022 earnings before the opening bell on Apr 14. While the company’s earnings are expected to have witnessed year-over-year decline, its revenues are expected to increase.
In the last-reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on fee income growth resulting from higher asset management revenues and corporate services. However, higher expenses, margin contraction and a decline in loans dragged results.
Notably, PNC Financial has an impressive earnings surprise history. It surpassed estimates in all trailing four quarters, delivering an earnings surprise of 24.1%, 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 first-quarter earnings of $2.99 has moved 3.9% downward in the past week, reflecting bearish sentiments of analysts. Further, the figure indicates a 27.1% decline from the year-ago reported number. Nonetheless, the consensus estimate for revenues is pegged at $4.74 billion, suggesting year-over-year growth of 12.3%.
Now, let’s discuss factors that are likely to have impacted the company’s first-quarter performance:
Net Interest Income (NII): Ongoing economic expansion is expected to have supported the lending environment in the quarter under review. Amid this, loan growth is anticipated to have improved. Per the Fed’s latest data, commercial and industrial loan, residential real estate loan, and consumer loan portfolios remained strong in January and February compared with fourth-quarter end. Hence, the company’s commercial loans, which comprise a notable part of PNC’s loan portfolio, are likely to have improved in the quarter under review. Further, management expects average loans, excluding Paycheck Protection Program loans, to be up 1-2% from the prior quarter.
The Zacks Consensus Estimate for average interest-earning assets of $505.2 billion for the quarter indicates a marginal rise sequentially. This is expected to have aided NII growth during the quarter under review.
In March, the Federal Reserve hiked short-term interest rates. While positive impact of the rising rates might reflect gradually in the subsequent quarters, interest rates remained relatively low in the first quarter. This might keep the NII subdued for the quarter under review. Also, fewer days in the quarter are likely to have affected NII. Management anticipates NII to be down 1-2% sequentially. Also, the consensus estimate for NII is pegged at $2.8 billion, suggesting 1.3% decline from the fourth quarter.
Non-Interest Revenues: While 2022 started on a positive note, the onset of the Russian-Ukraine war dampened the equity market performance. Thus, asset management revenues are anticipated to have been negatively impacted. Nonetheless, the consensus estimate of $279 million for asset management revenues indicates 11.2% growth sequentially.
Brokerage fees, comprising a part of the company’s consumer services revenues, might also be negatively affected due to lower equity markets. This might be partially offset by an improvement in the consumer spending scenario due to higher employee compensation, which is expected to have favorably impacted card fees in the quarter. The Zacks Consensus Estimate for consumer services revenues of $441 million indicates a decline of 13.2% from the prior quarter’s reported number.
In stark contrast to the past several quarters, deal-making considerably reduced in first-quarter 2022. Hence, with a decrease in global merger and acquisition volumes, the company’s corporate service fees are likely to have been negatively impacted. Further, the Zacks Consensus Estimate for corporate services revenues of $645 million indicates a decline of 23.1% sequentially.
Deposits slowed in the quarter, likely due to a decrease in government aid and consumer savings. Further, the company initiated a policy to reduce overdraft fees in 2021. These factors are likely to have resulted in lower revenues from service charges on deposits.
Mortgage rates increased sequentially in the to-be reported quarter. Also, mortgage origination activities are estimated to have decreased dramatically, with the rising rates dismaying refinancing activity. Thus, these factors are expected to have abated PNC Financial’s residential mortgage revenues in the to-be-reported quarter.
Management projects other non-interest income of $375-$425 million.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $2 billion, suggesting a 12.2% decrease sequentially. Management expects fee income to decrease 4-6% sequentially.
Expenses: The bank’s continued efforts toward cost savings are anticipated to have been partially offset by higher personnel expenses, as well as ongoing investments in technology. Nonetheless, the company incurred most of the integration expenses related to the BBVA USA acquisition in the previous quarter. Hence, reduced costs from such expenses will likely alleviate pressure from bottom-line growth. Management expects non-interest expenses (excluding integration expenses) to be sequentially down 4-6%.
Asset Quality: With the gradual economic improvement, backed by continued market re-openings throughout the quarter, PNC Financial is likely to have witnessed provision recaptures in the first quarter, albeit at a slower level. Management expects net loan charge-offs to be approximately $100-$150 million.
What the Zacks Model Reveals
Our proven model does not show 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 -6.63%. Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
Associated Bancorp (ASB - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few banking stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for ASB is +3.72% and the company carries a Zacks Rank #2 (Buy) at present. ASB is slated to report first-quarter 2022 results on Apr 21.
The Zacks Consensus Estimate for ASB’s first-quarter earnings has moved 2.7% north over the past week.
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Key Factors to Impact PNC Financial's (PNC) Q1 Earnings
PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report first-quarter 2022 earnings before the opening bell on Apr 14. While the company’s earnings are expected to have witnessed year-over-year decline, its revenues are expected to increase.
In the last-reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on fee income growth resulting from higher asset management revenues and corporate services. However, higher expenses, margin contraction and a decline in loans dragged results.
Notably, PNC Financial has an impressive earnings surprise history. It surpassed estimates in all trailing four quarters, delivering an earnings surprise of 24.1%, 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 first-quarter earnings of $2.99 has moved 3.9% downward in the past week, reflecting bearish sentiments of analysts. Further, the figure indicates a 27.1% decline from the year-ago reported number. Nonetheless, the consensus estimate for revenues is pegged at $4.74 billion, suggesting year-over-year growth of 12.3%.
Now, let’s discuss factors that are likely to have impacted the company’s first-quarter performance:
Net Interest Income (NII): Ongoing economic expansion is expected to have supported the lending environment in the quarter under review. Amid this, loan growth is anticipated to have improved. Per the Fed’s latest data, commercial and industrial loan, residential real estate loan, and consumer loan portfolios remained strong in January and February compared with fourth-quarter end. Hence, the company’s commercial loans, which comprise a notable part of PNC’s loan portfolio, are likely to have improved in the quarter under review. Further, management expects average loans, excluding Paycheck Protection Program loans, to be up 1-2% from the prior quarter.
The Zacks Consensus Estimate for average interest-earning assets of $505.2 billion for the quarter indicates a marginal rise sequentially. This is expected to have aided NII growth during the quarter under review.
In March, the Federal Reserve hiked short-term interest rates. While positive impact of the rising rates might reflect gradually in the subsequent quarters, interest rates remained relatively low in the first quarter. This might keep the NII subdued for the quarter under review. Also, fewer days in the quarter are likely to have affected NII. Management anticipates NII to be down 1-2% sequentially. Also, the consensus estimate for NII is pegged at $2.8 billion, suggesting 1.3% decline from the fourth quarter.
Non-Interest Revenues: While 2022 started on a positive note, the onset of the Russian-Ukraine war dampened the equity market performance. Thus, asset management revenues are anticipated to have been negatively impacted. Nonetheless, the consensus estimate of $279 million for asset management revenues indicates 11.2% growth sequentially.
Brokerage fees, comprising a part of the company’s consumer services revenues, might also be negatively affected due to lower equity markets. This might be partially offset by an improvement in the consumer spending scenario due to higher employee compensation, which is expected to have favorably impacted card fees in the quarter. The Zacks Consensus Estimate for consumer services revenues of $441 million indicates a decline of 13.2% from the prior quarter’s reported number.
In stark contrast to the past several quarters, deal-making considerably reduced in first-quarter 2022. Hence, with a decrease in global merger and acquisition volumes, the company’s corporate service fees are likely to have been negatively impacted. Further, the Zacks Consensus Estimate for corporate services revenues of $645 million indicates a decline of 23.1% sequentially.
Deposits slowed in the quarter, likely due to a decrease in government aid and consumer savings. Further, the company initiated a policy to reduce overdraft fees in 2021. These factors are likely to have resulted in lower revenues from service charges on deposits.
Mortgage rates increased sequentially in the to-be reported quarter. Also, mortgage origination activities are estimated to have decreased dramatically, with the rising rates dismaying refinancing activity. Thus, these factors are expected to have abated PNC Financial’s residential mortgage revenues in the to-be-reported quarter.
Management projects other non-interest income of $375-$425 million.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $2 billion, suggesting a 12.2% decrease sequentially. Management expects fee income to decrease 4-6% sequentially.
Expenses: The bank’s continued efforts toward cost savings are anticipated to have been partially offset by higher personnel expenses, as well as ongoing investments in technology. Nonetheless, the company incurred most of the integration expenses related to the BBVA USA acquisition in the previous quarter. Hence, reduced costs from such expenses will likely alleviate pressure from bottom-line growth. Management expects non-interest expenses (excluding integration expenses) to be sequentially down 4-6%.
Asset Quality: With the gradual economic improvement, backed by continued market re-openings throughout the quarter, PNC Financial is likely to have witnessed provision recaptures in the first quarter, albeit at a slower level. Management expects net loan charge-offs to be approximately $100-$150 million.
What the Zacks Model Reveals
Our proven model does not show 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 -6.63%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
Associated Bancorp (ASB - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few banking stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
The Earnings ESP for ASB is +3.72% and the company carries a Zacks Rank #2 (Buy) at present. ASB is slated to report first-quarter 2022 results on Apr 21.
The Zacks Consensus Estimate for ASB’s first-quarter earnings has moved 2.7% north over the past week.
MTB is scheduled to release first-quarter results on Apr 20. MTB currently has a Zacks Rank #3 and an Earnings ESP of +2.08%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MTB’s first-quarter earnings has moved marginally downward over the past 30 days.
STT is scheduled to release earnings on Apr 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.97%.
The Zacks Consensus Estimate for STT’s first-quarter earnings has been revised 2.1% north over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.