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The PNC Financial Services Group, Inc. (PNC - Free Report) has reported third-quarter 2022 earnings per share, as adjusted (excluding integration costs related to the BBVA USA acquisition) of $3.78, which surpassed the Zacks Consensus Estimate of $3.66. Also, the bottom line increased 0.8% year over year.
A rise in net interest income, driven by higher yields on interest-earning assets and loan growth, and a fall in expenses were tailwinds. However, a decline in fee income was concerning.
Net income in the third quarter was $1.64 billion, higher than $1.49 billion in the prior-year quarter.
Revenues Improve on NII, Expenses Decline
Total revenues in the reported quarter were $5.55 billion, up 6.8% year over year. The top line beat the Zacks Consensus Estimate of $5.39 billion.
Net interest income improved 21.8% from the year-ago quarter to $3.48 billion. The upswing is attributable to higher yields on interest-earning assets and loan growth, partially offset by higher funding costs. The net interest margin increased 55 basis points to 2.82%.
Non-interest income fell 11.4% year over year to $2.07 billion on a decline in residential and commercial mortgage revenues, capital markets-related revenues, asset management and brokerage revenues and lending and deposit services.
PNC Financial’s non-interest expenses totaled $3.28 billion, declining 9% from the year-ago figure. The decrease primarily resulted from lower integration expenses and a decline in variable compensation due to lower merger and acquisition advisory activity.
The efficiency ratio was 59% compared with 69% in the year-ago quarter. A lower efficiency ratio indicates higher profitability.
As of Sep 30, 2022, total loans grew 1% sequentially to $315.4 billion. However, total deposits decreased nearly 1% to $438.2 billion.
Credit Quality Mixed
The company reported the provision of credit losses of $241 million against the recapture of credit losses of $203 million in the year-earlier quarter. Net loan charge-offs were $119 million, up 47% year over year.
Nonetheless, non-performing loans decreased 18.2% year over year to $2.07 billion. Also, the allowance for loan and lease losses declined 14.5% to $4.58 billion on a year-over-year basis.
Capital Position Weak, Profitability Ratios Improve
As of Sep 30, 2022, the Basel III common equity tier 1 capital ratio was 9.3% compared with 10.3% as of Sep 30, 2021.
Return on average assets and average common shareholders’ equity were 1.19% and 14.97%, respectively, compared with 1.06% and 10.95% witnessed in the prior-year quarter.
Capital Deployment Activity
In the third quarter of 2022, PNC Financial returned $1.7 billion in capital to shareholders through dividends on common shares of $600 million and share repurchases amounting to $1.1 billion.
Nearly 53% of the company’s 100-million share repurchase program was available for repurchase as of the third-quarter end.
Our Viewpoint
PNC Financial gave an impressive performance in the third quarter, with expenses declining year over year. 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 decline in fee income is worrisome.
The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise
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PNC Financial (PNC) Q3 Earnings & Revenues Beat Estimates
The PNC Financial Services Group, Inc. (PNC - Free Report) has reported third-quarter 2022 earnings per share, as adjusted (excluding integration costs related to the BBVA USA acquisition) of $3.78, which surpassed the Zacks Consensus Estimate of $3.66. Also, the bottom line increased 0.8% year over year.
A rise in net interest income, driven by higher yields on interest-earning assets and loan growth, and a fall in expenses were tailwinds. However, a decline in fee income was concerning.
Net income in the third quarter was $1.64 billion, higher than $1.49 billion in the prior-year quarter.
Revenues Improve on NII, Expenses Decline
Total revenues in the reported quarter were $5.55 billion, up 6.8% year over year. The top line beat the Zacks Consensus Estimate of $5.39 billion.
Net interest income improved 21.8% from the year-ago quarter to $3.48 billion. The upswing is attributable to higher yields on interest-earning assets and loan growth, partially offset by higher funding costs. The net interest margin increased 55 basis points to 2.82%.
Non-interest income fell 11.4% year over year to $2.07 billion on a decline in residential and commercial mortgage revenues, capital markets-related revenues, asset management and brokerage revenues and lending and deposit services.
PNC Financial’s non-interest expenses totaled $3.28 billion, declining 9% from the year-ago figure. The decrease primarily resulted from lower integration expenses and a decline in variable compensation due to lower merger and acquisition advisory activity.
The efficiency ratio was 59% compared with 69% in the year-ago quarter. A lower efficiency ratio indicates higher profitability.
As of Sep 30, 2022, total loans grew 1% sequentially to $315.4 billion. However, total deposits decreased nearly 1% to $438.2 billion.
Credit Quality Mixed
The company reported the provision of credit losses of $241 million against the recapture of credit losses of $203 million in the year-earlier quarter. Net loan charge-offs were $119 million, up 47% year over year.
Nonetheless, non-performing loans decreased 18.2% year over year to $2.07 billion. Also, the allowance for loan and lease losses declined 14.5% to $4.58 billion on a year-over-year basis.
Capital Position Weak, Profitability Ratios Improve
As of Sep 30, 2022, the Basel III common equity tier 1 capital ratio was 9.3% compared with 10.3% as of Sep 30, 2021.
Return on average assets and average common shareholders’ equity were 1.19% and 14.97%, respectively, compared with 1.06% and 10.95% witnessed in the prior-year quarter.
Capital Deployment Activity
In the third quarter of 2022, PNC Financial returned $1.7 billion in capital to shareholders through dividends on common shares of $600 million and share repurchases amounting to $1.1 billion.
Nearly 53% of the company’s 100-million share repurchase program was available for repurchase as of the third-quarter end.
Our Viewpoint
PNC Financial gave an impressive performance in the third quarter, with expenses declining year over year. 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 decline in fee income is worrisome.
The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise
The PNC Financial Services Group, Inc price-consensus-eps-surprise-chart | The PNC Financial Services Group, Inc Quote
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 - Free Report) is slated to report third-quarter 2022 results on Oct 20.
The Zacks Consensus Estimate for Fifth Third’s third-quarter earnings of 98 cents indicates a 4.3% rise from the prior-year quarter.
Citizens Financial Group (CFG - Free Report) is slated to report third-quarter 2022 results on Oct 19.
The Zacks Consensus Estimate for Citizens Financial’s third-quarter earnings of $1.22 is flat from the prior-year quarter.