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PNC Financial (PNC) Down on Q4 Earnings Miss, Costs Dip Y/Y
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The PNC Financial Services Group, Inc.’s (PNC - Free Report) fourth-quarter 2022 adjusted earnings per share of $3.49 lagged the Zacks Consensus Estimate of $3.95. Also, the bottom line declined 5.2% year over year.
Shares of PNC fell 4.4% in pre-market trading on worse-than-expected results. A full-day trading session will depict a clearer picture.
Results were primarily hurt by a decline in non-interest income and higher provisions. However, an increase in net interest income, supported by higher rates and loan growth, and a decline in expenses were tailwinds.
Net income was $1.55 billion, higher than $1.31 billion in the prior-year quarter.
For 2022, adjusted earnings were $13.96 per share, which missed the Zacks Consensus Estimate of $14.35. Also, the bottom line declined 1.6% year over year. Net income was $6.11 billion, higher than $5.73 billion in the prior-year period.
Revenues Improve, Expenses Decline
Total quarterly revenues were $5.76 billion, up 12.4% year over year. The top line beat the Zacks Consensus Estimate of $5.69 billion.
For 2022, revenues were $21.12 billion, up 9.9% year over year. The top line beat the Zacks Consensus Estimate of $21.06 billion.
Quarterly net interest income was $3.68 billion, which improved 28.7% from the year-ago quarter. The upswing is attributable to higher interest-earning asset yields and balances, partially offset by higher funding costs. The net interest margin increased 65 basis points to 2.92%.
Non-interest income fell 8.2% year over year to $2.08 billion. The decline was due to a fall in almost all fee income components, except for card and cash management fees, and lending and deposit services fees.
Non-interest expenses totaled $3.47 billion, declining 8.4% from the year-ago figure. All cost components declined, except for marketing costs.
The efficiency ratio was 60% compared with 74% in the year-ago quarter. A lower efficiency ratio indicates higher profitability.
As of Dec 31, 2022, total loans were $326.03 billion, which grew 3.4% sequentially. However, total deposits decreased marginally from the end of the previous quarter to $436.28 billion.
Credit Quality: A Mixed Bag
The company reported provision for credit losses of $408 million in the fourth quarter against the recapture of credit losses of $327 million in the year-earlier quarter. Net loan charge-offs were $224 million, up 80.6% year over year.
Nonetheless, non-performing loans decreased 20% year over year to $1.99 billion. Also, the allowance for credit losses declined 1.7% to $5.44 billion.
Capital Position Weakens, Profitability Ratios Improve
As of Dec 31, 2022, the Basel III common equity tier 1 capital ratio was 9.1% compared with 10.3% as of Dec 31, 2021.
Return on average assets and average common shareholders’ equity were 1.10% and 14.19%, respectively, compared with 0.93% and 9.61% witnessed in the prior-year quarter.
Capital Deployment Activity
In the fourth quarter of 2022, PNC Financial returned $1.2 billion of capital to shareholders through dividends on common shares of $0.6 billion and share repurchases amounting to $0.6 billion.
Our Viewpoint
PNC Financial is well-poised to grow on the back of its diverse revenue mix. With rising rates, the company’s net interest income and margins are positioned to increase further, which is encouraging. However, the continued decline in fee income is worrisome.
The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results were aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues hurt BK’s results to some extent.
Higher loan balance, rising rates and robust trading performance drove JPMorgan’s (JPM - Free Report) fourth-quarter 2022 adjusted earnings of $3.56 per share, which surpassed the Zacks Consensus Estimate of $3.11. Results excluded gains from the sale of Visa B shares and net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
As expected, the performance of JPM’s investment banking business was hugely disappointing. Further, mortgage fees and related income declined 69%, as mortgage rates were above the 6% mark in the fourth quarter. Then again, higher interest rates and a solid rise in loan balance aided JPMorgan’s net interest income.
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PNC Financial (PNC) Down on Q4 Earnings Miss, Costs Dip Y/Y
The PNC Financial Services Group, Inc.’s (PNC - Free Report) fourth-quarter 2022 adjusted earnings per share of $3.49 lagged the Zacks Consensus Estimate of $3.95. Also, the bottom line declined 5.2% year over year.
Shares of PNC fell 4.4% in pre-market trading on worse-than-expected results. A full-day trading session will depict a clearer picture.
Results were primarily hurt by a decline in non-interest income and higher provisions. However, an increase in net interest income, supported by higher rates and loan growth, and a decline in expenses were tailwinds.
Net income was $1.55 billion, higher than $1.31 billion in the prior-year quarter.
For 2022, adjusted earnings were $13.96 per share, which missed the Zacks Consensus Estimate of $14.35. Also, the bottom line declined 1.6% year over year. Net income was $6.11 billion, higher than $5.73 billion in the prior-year period.
Revenues Improve, Expenses Decline
Total quarterly revenues were $5.76 billion, up 12.4% year over year. The top line beat the Zacks Consensus Estimate of $5.69 billion.
For 2022, revenues were $21.12 billion, up 9.9% year over year. The top line beat the Zacks Consensus Estimate of $21.06 billion.
Quarterly net interest income was $3.68 billion, which improved 28.7% from the year-ago quarter. The upswing is attributable to higher interest-earning asset yields and balances, partially offset by higher funding costs. The net interest margin increased 65 basis points to 2.92%.
Non-interest income fell 8.2% year over year to $2.08 billion. The decline was due to a fall in almost all fee income components, except for card and cash management fees, and lending and deposit services fees.
Non-interest expenses totaled $3.47 billion, declining 8.4% from the year-ago figure. All cost components declined, except for marketing costs.
The efficiency ratio was 60% compared with 74% in the year-ago quarter. A lower efficiency ratio indicates higher profitability.
As of Dec 31, 2022, total loans were $326.03 billion, which grew 3.4% sequentially. However, total deposits decreased marginally from the end of the previous quarter to $436.28 billion.
Credit Quality: A Mixed Bag
The company reported provision for credit losses of $408 million in the fourth quarter against the recapture of credit losses of $327 million in the year-earlier quarter. Net loan charge-offs were $224 million, up 80.6% year over year.
Nonetheless, non-performing loans decreased 20% year over year to $1.99 billion. Also, the allowance for credit losses declined 1.7% to $5.44 billion.
Capital Position Weakens, Profitability Ratios Improve
As of Dec 31, 2022, the Basel III common equity tier 1 capital ratio was 9.1% compared with 10.3% as of Dec 31, 2021.
Return on average assets and average common shareholders’ equity were 1.10% and 14.19%, respectively, compared with 0.93% and 9.61% witnessed in the prior-year quarter.
Capital Deployment Activity
In the fourth quarter of 2022, PNC Financial returned $1.2 billion of capital to shareholders through dividends on common shares of $0.6 billion and share repurchases amounting to $0.6 billion.
Our Viewpoint
PNC Financial is well-poised to grow on the back of its diverse revenue mix. With rising rates, the company’s net interest income and margins are positioned to increase further, which is encouraging. However, 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.
Performance of Other Banks
Bank of New York Mellon Corporation’s (BK - Free Report) fourth-quarter 2022 adjusted earnings of $1.30 per share surpassed the Zacks Consensus Estimate of $1.22. The bottom line reflects a rise of 25% from the prior-year quarter. Our estimate for earnings was $1.09.
BK’s results were aided by a rise in net interest revenues. However, asset balances witnessed a decline, which was a negative. Higher expenses and lower fee revenues hurt BK’s results to some extent.
Higher loan balance, rising rates and robust trading performance drove JPMorgan’s (JPM - Free Report) fourth-quarter 2022 adjusted earnings of $3.56 per share, which surpassed the Zacks Consensus Estimate of $3.11. Results excluded gains from the sale of Visa B shares and net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
As expected, the performance of JPM’s investment banking business was hugely disappointing. Further, mortgage fees and related income declined 69%, as mortgage rates were above the 6% mark in the fourth quarter. Then again, higher interest rates and a solid rise in loan balance aided JPMorgan’s net interest income.