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Fee Income Decline to Hurt PNC Financial's (PNC) Q3 Earnings
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PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report third-quarter 2022 earnings before the opening bell on Oct 14. While the company’s earnings are expected to have witnessed a year-over-year decline, its revenues are likely to have increased.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on net interest income (NII) growth. However, higher expenses and a decline in fee income affected the results.
Notably, PNC Financial has an impressive earnings surprise history. It surpassed estimates in the trailing four quarters, delivering an earnings surprise of 8.3%, on average.
The PNC Financial Services Group, Inc Price and EPS Surprise
The company’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of $3.71 has moved marginally downward in the past week, reflecting the bearish sentiments of analysts. The figure indicates a 1.1% decline from the year-ago reported number.
Nonetheless, the consensus estimate for revenues is pegged at $5.4 billion, suggesting 3.8% year-over-year growth. Management expects the top line to be up 4-6% sequentially.
Let’s discuss the factors that are likely to have impacted the company’s third-quarter performance.
NII: Per the Fed’s latest data, loan growth continued at a decent pace in the to-be-reported quarter, with commercial and industrial loans, real estate loans, and consumer loans slightly moderating in July and August from the second quarter. Encouragingly, commercial real estate loan growth accelerated in the third quarter. This is likely to have supported PNC’s loan balances, comprising 68% of commercial loans. The company expects average loans to rise 1-2% sequentially.
The Zacks Consensus Estimate for average interest-earning assets of $499.8 billion for the quarter indicates a 2.3% sequential rise. This is expected to have aided NII growth in the quarter.
Further, the Federal Reserve continued increasing interest rates in the quarter to tame inflation. It raised interest rates by 150 basis points in the quarter, resulting in a policy rate of 3.0-3.25%, the highest level since 2008. This is likely to have had a favorable impact on the bank’s asset yield, net interest margin (NIM) and NII. However, the inversion of the yield curve in the September-ended quarter is expected to have weighed on NIM to some extent.
Management anticipates NII to grow 10-12% sequentially. Also, the consensus estimate for NII is pegged at $3.4 billion, suggesting an 11.2% rise from the prior quarter’s reported figure.
Non-Interest Revenues: Heightening volatility, uncertainty, recession fears and geopolitical tensions dampened the equity market performance. Thus, asset management and brokerage fee revenues are anticipated to have been negatively impacted.
Due to weak markets and global economic uncertainty, deal-making activity and IPOs reduced in third-quarter 2022. Given the capital market disruptions, the company’s capital market-related revenues are likely to have been negatively impacted.
Deposits slowed down in the quarter, likely due to a decrease in government aid and consumer savings. Also, in the quarter, PNC removed non-sufficient fund fees from all consumer deposit accounts. These are expected to have led to lower revenues from service charges on deposits.
Mortgage rates increased sequentially in the to-be-reported quarter, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. Also, mortgage origination activities are estimated to have decreased drastically, with the rising rates affecting refinancing activity. Thus, the factors are expected to have hurt PNC Financial’s residential mortgage revenues in the to-be-reported quarter.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $1.98 billion, suggesting a 3.7% decrease sequentially. Management expects fee income to fall 3-5% sequentially.
Expenses: Overall, technology investments and general inflationary pressures are likely to have inflated costs, while wage inflation is anticipated to have escalated personnel expenses. Hence, the rise in cost base from such expenses is likely to have impeded bottom-line growth. Management expects non-interest expenses to be stable to up 1%.
What the Zacks Model Reveals
Our proven model does not predict an earnings beat for PNC Financial this time around. This is because it does not have 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.
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 -1.92%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
BankUnited (BKU - Free Report) and M&T Bank (MTB - Free Report) are a few 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 BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
MTB is scheduled to release third-quarter results on Oct 19. MTB currently has a Zacks Rank #3 and an Earnings ESP of +0.34%.
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Fee Income Decline to Hurt PNC Financial's (PNC) Q3 Earnings
PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report third-quarter 2022 earnings before the opening bell on Oct 14. While the company’s earnings are expected to have witnessed a year-over-year decline, its revenues are likely to have increased.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on net interest income (NII) growth. However, higher expenses and a decline in fee income affected the results.
Notably, PNC Financial has an impressive earnings surprise history. It surpassed estimates in the trailing four quarters, delivering an earnings surprise of 8.3%, on average.
The PNC Financial Services Group, Inc Price and EPS Surprise
The PNC Financial Services Group, Inc price-eps-surprise | The PNC Financial Services Group, Inc Quote
The company’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings of $3.71 has moved marginally downward in the past week, reflecting the bearish sentiments of analysts. The figure indicates a 1.1% decline from the year-ago reported number.
Nonetheless, the consensus estimate for revenues is pegged at $5.4 billion, suggesting 3.8% year-over-year growth. Management expects the top line to be up 4-6% sequentially.
Let’s discuss the factors that are likely to have impacted the company’s third-quarter performance.
NII: Per the Fed’s latest data, loan growth continued at a decent pace in the to-be-reported quarter, with commercial and industrial loans, real estate loans, and consumer loans slightly moderating in July and August from the second quarter. Encouragingly, commercial real estate loan growth accelerated in the third quarter. This is likely to have supported PNC’s loan balances, comprising 68% of commercial loans. The company expects average loans to rise 1-2% sequentially.
The Zacks Consensus Estimate for average interest-earning assets of $499.8 billion for the quarter indicates a 2.3% sequential rise. This is expected to have aided NII growth in the quarter.
Further, the Federal Reserve continued increasing interest rates in the quarter to tame inflation. It raised interest rates by 150 basis points in the quarter, resulting in a policy rate of 3.0-3.25%, the highest level since 2008. This is likely to have had a favorable impact on the bank’s asset yield, net interest margin (NIM) and NII. However, the inversion of the yield curve in the September-ended quarter is expected to have weighed on NIM to some extent.
Management anticipates NII to grow 10-12% sequentially. Also, the consensus estimate for NII is pegged at $3.4 billion, suggesting an 11.2% rise from the prior quarter’s reported figure.
Non-Interest Revenues: Heightening volatility, uncertainty, recession fears and geopolitical tensions dampened the equity market performance. Thus, asset management and brokerage fee revenues are anticipated to have been negatively impacted.
Due to weak markets and global economic uncertainty, deal-making activity and IPOs reduced in third-quarter 2022. Given the capital market disruptions, the company’s capital market-related revenues are likely to have been negatively impacted.
Deposits slowed down in the quarter, likely due to a decrease in government aid and consumer savings. Also, in the quarter, PNC removed non-sufficient fund fees from all consumer deposit accounts. These are expected to have led to lower revenues from service charges on deposits.
Mortgage rates increased sequentially in the to-be-reported quarter, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. Also, mortgage origination activities are estimated to have decreased drastically, with the rising rates affecting refinancing activity. Thus, the factors are expected to have hurt PNC Financial’s residential mortgage revenues in the to-be-reported quarter.
Overall, the Zacks Consensus Estimate for non-interest income is pegged at $1.98 billion, suggesting a 3.7% decrease sequentially. Management expects fee income to fall 3-5% sequentially.
Expenses: Overall, technology investments and general inflationary pressures are likely to have inflated costs, while wage inflation is anticipated to have escalated personnel expenses. Hence, the rise in cost base from such expenses is likely to have impeded bottom-line growth. Management expects non-interest expenses to be stable to up 1%.
What the Zacks Model Reveals
Our proven model does not predict an earnings beat for PNC Financial this time around. This is because it does not have 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.
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 -1.92%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks That Warrant a Look
BankUnited (BKU - Free Report) and M&T Bank (MTB - Free Report) are a few 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 BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
MTB is scheduled to release third-quarter results on Oct 19. MTB currently has a Zacks Rank #3 and an Earnings ESP of +0.34%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.