The PNC Financial Services Group, Inc. (PNC Quick QuotePNC - Free Report) has reported second-quarter 2022 earnings per share, as adjusted (excluding integration costs related to the BBVA USA acquisition) of $3.42, which surpassed the Zacks Consensus Estimate of $3.11. Also, the bottom line increased 30% year over year.

Higher net interest income, driven by interest-earning assets and loan growth, were tailwinds. However, rising expenses and a decline in fee income were hurdles.

Net income for the second quarter was $1.49 billion, higher than $1.10 billion in the prior-year quarter.

Revenues Improve on NII, Expenses Rise

Total revenues in the reported quarter were $5.12 billion, up 9.6% year over year. The top line beat the Zacks Consensus Estimate of $5.10 billion.

Net interest income improved 18% from the year-ago quarter to $3.05 billion. The upswing is attributable to higher interest-earning assets, partially offset by higher funding costs. The net interest margin increased 21 basis points to 2.50%.

Non-interest income dipped 1% year over year to $2.06 billion on a decline in residential and commercial mortgage revenues, and lending and deposit services.

PNC Financial’s non-interest expenses totaled $3.24 billion, up 6.2% from the year-ago figure. The increase primarily resulted from the rise in all components other than other expenses.

The efficiency ratio was 63% compared with 65% in the year-ago quarter. A lower efficiency ratio indicates higher profitability.

As of Jun 30, 2022, total loans grew 6% sequentially to $310.8 billion. However, total deposits decreased 2% to $440.8 billion.

Credit Quality Strong

The company reported the provision of credit losses of $36 million, lower than the $302 million in the year-earlier quarter. Non-performing loans decreased 26.4% year over year to $2.04 billion.

Also, the allowance for loan and lease losses declined 22.1% to $4.46 billion on a year-over-year basis. Net loan charge-offs were $83 million, down year over year from $306 million.

Capital Position Weak, Profitability Ratios Improve

As of Jun 30, 2022, the Basel III common equity tier 1 capital ratio was 9.6% compared with 10.1% as of Jun 30, 2021.

Return on average assets and average common shareholders’ equity were 1.10% and 13.52%, respectively, compared with 0.88% and 8.32% witnessed in the prior-year quarter.

Capital Deployment Activity

In the second quarter of 2022, PNC Financial returned $1.4 billion in capital to shareholders through dividends on common shares of $627 million and share repurchases amounting to $737 million.

The company’s board of directors recently authorized a repurchase plan under the previously-approved repurchase program of up to 100 million common shares. Of this, nearly 59% was available for repurchase as of the second-quarter end.

Our Viewpoint

PNC Financial gave an impressive performance in the second quarter. The company is well-poised to grow on the back of its diverse revenue mix. With the gradual rising rates, the company’s net interest income and margins are positioned to increase, which is encouraging. Yet, the continued rise in expenses is a headwind.

Currently, PNC Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Banks

Fifth Third Bancorp (FITB Quick QuoteFITB - Free Report) is slated to report second-quarter 2022 results on Jul 21.

The Zacks Consensus Estimate for Fifth Third’s second-quarter earnings of 87 cents indicates a 7.5% decline from the prior-year quarter’s reported figure.

Citizens Financial Group (CFG Quick QuoteCFG - Free Report) is slated to report second-quarter 2022 results on Jul 19.

The Zacks Consensus Estimate for Citizens Financial’s second-quarter earnings of $1.02 indicates a 30.1% decline from the prior-year quarter.