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PNC Financial (PNC) to Post Q2 Earnings: What's in Store?
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The PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report its second-quarter 2023 earnings before the opening bell on Jul 18. The company’s revenues are expected to have witnessed a year-over-year improvement, while its earnings are likely to have declined.
In the last reported quarter, the company’s earnings outpaced the Zacks Consensus Estimate on an increase in net interest income (NII), supported by higher rates and loan growth. However, rising expenses and higher provisions were headwinds.
Notably, PNC Financial has a decent earnings surprise history. It surpassed estimates in three of the trailing four quarters and missed once, delivering an earnings surprise of 3.04%, 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 second-quarter earnings of $3.28 has moved 1.2% downward in the past week, reflecting the bearish sentiments of analysts. Further, the figure indicates a 4.09% decline from the year-ago reported number.
Nonetheless, our estimate and the consensus estimate for revenues are pegged at $5.43 billion, suggesting year-over-year growth of 6.22%.
Management expects the top line to be down approximately 3% sequentially.
Now, let’s discuss factors that are likely to have impacted the company’s second-quarter performance.
Loans and NII: Banks’ lending activities are likely to have declined in the quarter under review, as the challenging macroeconomic backdrop and high-interest rates affected consumer spending. Per Federal Reserve’s latest data, demand for commercial and industrial loans, commercial real estate loans and consumer loans decreased in the first two months of the quarter. Given PNC’s high exposure to total commercial loans (nearly 69% as of Mar 31, 2023), the company is expected to have seen a decline in its lending book during the quarter.
Accordingly, the company expects average loans to remain flat during the quarter.
Such a decline in lending activities is likely to affect NII in the quarter under review. Further, the Fed increased rates by 25 basis points in May and then kept the rates unchanged at 5-5.25% during the June FOMC meeting. An increase in funding costs is likely to have adversely impacted NII to some extent as interest rates continued to remain high.
Management projects NII to decrease 2-4% sequentially. The Zacks Consensus Estimate for NII (on a fully taxable-equivalent or FTE basis) of $3.5 billion indicates a sequential decline of 3.4%. We project NII on FTE basis of $3.48 billion.
Non-Interest Revenues: The high inflation is expected to have increased transactions and spending volumes, thereby supporting PNC’s card fees in the quarter. The Zacks Consensus Estimate for card and cash management revenues of $664 million indicates a sequential increase of 1%.
Since the onset of the second quarter, uncertainty in the economy due to recession fears have dampened the equity market performance. Thus, asset management revenues are anticipated to have been negatively impacted. The consensus estimate of $355 million for asset management and brokerage revenues indicates a marginal decline sequentially.
Global deal making is likely to have continued shrinking in the second quarter from the prior-year period, with deal volume and total deal value numbers crashing. Geopolitical tensions, inflation, high-interest rates and fears of a global recession are likely to have acted as headwinds for merger and acquisition deals. Thus, the company’s capital markets and advisory revenues are likely to have been adversely impacted.
Further, in the second quarter, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from 4.6% reported in the prior-year quarter. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing compared with the prior-year quarter.
Thus, these factors are expected to have hurt PNC Financial’s residential and commercial mortgage revenues. The Zacks Consensus Estimate for the same of $165 million indicates a decrease of 9.6% sequentially.
Overall, management expects fee income to remain stable to down 1% sequentially. The Zacks Consensus Estimate for non-interest income is pegged at $1.98 billion, suggesting a 1.9% decrease sequentially. Our estimate for the metric matches the Zacks Consensus Estimate.
Expenses: Technology investments and general inflationary pressures are likely to have inflated costs, while wage inflation is anticipated to have escalated personnel expenses. Such a rise in expenses is likely to have limited bottom-line growth in the second quarter. Management expects non-interest expenses to be sequentially up 1-2%. Our estimate for the metric is pegged at $3.36 billion, indicating a sequential increase of 1.2%. Nonetheless, its focus on cost-containment measures is likely to have reduced expenses to some extent, offering support.
Asset Quality: PNC Financial is expected to have set aside substantial money for potential bad loans, given the global recession risk due to geopolitical and macroeconomic concerns and tighter financial conditions. Hence, higher reserve built during the quarter is expected to have weighed on PNC’s bottom-line growth.
The Zacks Consensus Estimate for non-performing loans of $2.28 billion implies a 13.2% increase sequentially. Further, the consensus estimate for non-performing assets of $2.24 suggests a 9.3% increase.
What the Zacks Model Reveals
Our proven model predicts an earnings beat for PNC Financial this time around. This is because it has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) — 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 +1.41%.
Other Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and M&T Bank Corporation (MTB - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat on their respective quarters to be reported.
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PNC Financial (PNC) to Post Q2 Earnings: What's in Store?
The PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report its second-quarter 2023 earnings before the opening bell on Jul 18. The company’s revenues are expected to have witnessed a year-over-year improvement, while its earnings are likely to have declined.
In the last reported quarter, the company’s earnings outpaced the Zacks Consensus Estimate on an increase in net interest income (NII), supported by higher rates and loan growth. However, rising expenses and higher provisions were headwinds.
Notably, PNC Financial has a decent earnings surprise history. It surpassed estimates in three of the trailing four quarters and missed once, delivering an earnings surprise of 3.04%, 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 second-quarter earnings of $3.28 has moved 1.2% downward in the past week, reflecting the bearish sentiments of analysts. Further, the figure indicates a 4.09% decline from the year-ago reported number.
Nonetheless, our estimate and the consensus estimate for revenues are pegged at $5.43 billion, suggesting year-over-year growth of 6.22%.
Management expects the top line to be down approximately 3% sequentially.
Now, let’s discuss factors that are likely to have impacted the company’s second-quarter performance.
Loans and NII: Banks’ lending activities are likely to have declined in the quarter under review, as the challenging macroeconomic backdrop and high-interest rates affected consumer spending. Per Federal Reserve’s latest data, demand for commercial and industrial loans, commercial real estate loans and consumer loans decreased in the first two months of the quarter. Given PNC’s high exposure to total commercial loans (nearly 69% as of Mar 31, 2023), the company is expected to have seen a decline in its lending book during the quarter.
Accordingly, the company expects average loans to remain flat during the quarter.
Such a decline in lending activities is likely to affect NII in the quarter under review. Further, the Fed increased rates by 25 basis points in May and then kept the rates unchanged at 5-5.25% during the June FOMC meeting. An increase in funding costs is likely to have adversely impacted NII to some extent as interest rates continued to remain high.
Management projects NII to decrease 2-4% sequentially. The Zacks Consensus Estimate for NII (on a fully taxable-equivalent or FTE basis) of $3.5 billion indicates a sequential decline of 3.4%. We project NII on FTE basis of $3.48 billion.
Non-Interest Revenues: The high inflation is expected to have increased transactions and spending volumes, thereby supporting PNC’s card fees in the quarter. The Zacks Consensus Estimate for card and cash management revenues of $664 million indicates a sequential increase of 1%.
Since the onset of the second quarter, uncertainty in the economy due to recession fears have dampened the equity market performance. Thus, asset management revenues are anticipated to have been negatively impacted. The consensus estimate of $355 million for asset management and brokerage revenues indicates a marginal decline sequentially.
Global deal making is likely to have continued shrinking in the second quarter from the prior-year period, with deal volume and total deal value numbers crashing. Geopolitical tensions, inflation, high-interest rates and fears of a global recession are likely to have acted as headwinds for merger and acquisition deals. Thus, the company’s capital markets and advisory revenues are likely to have been adversely impacted.
Further, in the second quarter, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from 4.6% reported in the prior-year quarter. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing compared with the prior-year quarter.
Thus, these factors are expected to have hurt PNC Financial’s residential and commercial mortgage revenues. The Zacks Consensus Estimate for the same of $165 million indicates a decrease of 9.6% sequentially.
Overall, management expects fee income to remain stable to down 1% sequentially. The Zacks Consensus Estimate for non-interest income is pegged at $1.98 billion, suggesting a 1.9% decrease sequentially. Our estimate for the metric matches the Zacks Consensus Estimate.
Expenses: Technology investments and general inflationary pressures are likely to have inflated costs, while wage inflation is anticipated to have escalated personnel expenses. Such a rise in expenses is likely to have limited bottom-line growth in the second quarter. Management expects non-interest expenses to be sequentially up 1-2%. Our estimate for the metric is pegged at $3.36 billion, indicating a sequential increase of 1.2%. Nonetheless, its focus on cost-containment measures is likely to have reduced expenses to some extent, offering support.
Asset Quality: PNC Financial is expected to have set aside substantial money for potential bad loans, given the global recession risk due to geopolitical and macroeconomic concerns and tighter financial conditions. Hence, higher reserve built during the quarter is expected to have weighed on PNC’s bottom-line growth.
The Zacks Consensus Estimate for non-performing loans of $2.28 billion implies a 13.2% increase sequentially. Further, the consensus estimate for non-performing assets of $2.24 suggests a 9.3% increase.
What the Zacks Model Reveals
Our proven model predicts an earnings beat for PNC Financial this time around. This is because it has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) — 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 +1.41%.
Other Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and M&T Bank Corporation (MTB - Free Report) are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat on their respective quarters to be reported.
The Earnings ESP for FCNCA is +3.21% and currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
MTB is scheduled to release second-quarter 2023 results on Jul 19. It currently has an Earnings ESP of +1.01% and a Zacks Rank #3.
The Zacks Consensus Estimate for MTB’s second-quarter earnings has moved 1% south over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.