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PNC Financial (PNC) Stock Down Despite Q2 Earnings Beat
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The PNC Financial Services Group, Inc.’s (PNC - Free Report) second-quarter 2023 earnings per share of $3.36 surpassed the Zacks Consensus Estimate of $3.31. However, the bottom line reflects a marginal decline year-over-year.
Shares of PNC fell 3% in pre-market trading, despite better-than-expected results. A full-day trading session will depict a clearer picture.
Results were aided by an increase in net interest income (NII), supported by higher rates. However, rising expenses and higher provisions were headwinds.
Net income was $1.5 billion, increasing marginally from the prior-year quarter. Our model estimated net income to be $1.32 billion.
Revenues and Expenses Rise
Total quarterly revenues were $5.29 billion, up 3.5% year over year. The top line missed the Zacks Consensus Estimate of $5.42 billion.
Quarterly NII was $3.51 billion, improving 15% 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 29 basis points to 2.79%. Our estimate for NII was $3.45 billion.
Non-interest income fell 13.7% year over year to $1.78 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. Our estimate was $1.98 billion.
Non-interest expenses totaled $3.37 billion, increasing 3.9% from the year-ago figure. All cost components increased, except occupancy costs and equipment costs. Our estimate for total non-interest expenses was $3.36 billion.
The efficiency ratio was 64% compared with 63% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Jun 30, 2023, total loans were $321.76 billion, which decreased 1.4% on a sequential basis. Our estimate for total loans was $326.74. Also, total deposits decreased 2.1% from the end of the previous quarter to $427.49 billion.
Credit Quality: A Mixed Bag
The company reported a provision for credit losses of $146 million in the second quarter, higher than the $36 million in the year-earlier quarter. Net loan charge-offs were $194 million, up significantly year over year. Also, the allowance for credit losses increased 5% to $5.4 billion.
Nonetheless, non-performing loans decreased 6.5% year over year to $1.91 billion.
Capital Position & Profitability Ratios Weaken
As of Jun 30, 2023, the Basel III common equity tier 1 capital ratio was 9.5% compared with 9.6% as of Jun 30, 2022.
Return on average assets and average common shareholders’ equity were 1.08% and 13.01%, respectively, compared with 1.10% and 13.52% witnessed in the prior-year quarter.
Capital Deployment Activity
In the second quarter of 2023, PNC Financial returned $0.7 billion of capital to shareholders through dividends on common shares of $0.6 billion and share repurchases amounting to $0.1 billion.
Our Viewpoint
PNC Financial is well-poised to grow on the back of its diverse revenue mix. With higher rates, the company’s NII and margins are positioned to increase further, which is encouraging. However, the rise in expenses, as well as higher provisions are worrisome. Also, its continued decline in fee income is a concern.
The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise
BankUnited (BKU - Free Report) is scheduled to announce its second-quarter 2023 results on Jul 25.
Over the past 60 days, the Zacks Consensus Estimate for BKU’s quarterly earnings has moved up 2.6% to 79 cents per share. The estimate indicates a 3.7% decrease from the prior-year quarter.
Truist Financial Corporation (TFC - Free Report) is slated to release its second-quarter 2023 numbers on Jul 20.
Over the past seven days, the Zacks Consensus Estimate for TFC’s quarterly earnings has moved down 3% to 98 cents per share. The figure implies an 18.3% decrease from the prior-year quarter.
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PNC Financial (PNC) Stock Down Despite Q2 Earnings Beat
The PNC Financial Services Group, Inc.’s (PNC - Free Report) second-quarter 2023 earnings per share of $3.36 surpassed the Zacks Consensus Estimate of $3.31. However, the bottom line reflects a marginal decline year-over-year.
Shares of PNC fell 3% in pre-market trading, despite better-than-expected results. A full-day trading session will depict a clearer picture.
Results were aided by an increase in net interest income (NII), supported by higher rates. However, rising expenses and higher provisions were headwinds.
Net income was $1.5 billion, increasing marginally from the prior-year quarter. Our model estimated net income to be $1.32 billion.
Revenues and Expenses Rise
Total quarterly revenues were $5.29 billion, up 3.5% year over year. The top line missed the Zacks Consensus Estimate of $5.42 billion.
Quarterly NII was $3.51 billion, improving 15% 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 29 basis points to 2.79%. Our estimate for NII was $3.45 billion.
Non-interest income fell 13.7% year over year to $1.78 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. Our estimate was $1.98 billion.
Non-interest expenses totaled $3.37 billion, increasing 3.9% from the year-ago figure. All cost components increased, except occupancy costs and equipment costs. Our estimate for total non-interest expenses was $3.36 billion.
The efficiency ratio was 64% compared with 63% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Jun 30, 2023, total loans were $321.76 billion, which decreased 1.4% on a sequential basis. Our estimate for total loans was $326.74. Also, total deposits decreased 2.1% from the end of the previous quarter to $427.49 billion.
Credit Quality: A Mixed Bag
The company reported a provision for credit losses of $146 million in the second quarter, higher than the $36 million in the year-earlier quarter. Net loan charge-offs were $194 million, up significantly year over year. Also, the allowance for credit losses increased 5% to $5.4 billion.
Nonetheless, non-performing loans decreased 6.5% year over year to $1.91 billion.
Capital Position & Profitability Ratios Weaken
As of Jun 30, 2023, the Basel III common equity tier 1 capital ratio was 9.5% compared with 9.6% as of Jun 30, 2022.
Return on average assets and average common shareholders’ equity were 1.08% and 13.01%, respectively, compared with 1.10% and 13.52% witnessed in the prior-year quarter.
Capital Deployment Activity
In the second quarter of 2023, PNC Financial returned $0.7 billion of capital to shareholders through dividends on common shares of $0.6 billion and share repurchases amounting to $0.1 billion.
Our Viewpoint
PNC Financial is well-poised to grow on the back of its diverse revenue mix. With higher rates, the company’s NII and margins are positioned to increase further, which is encouraging. However, the rise in expenses, as well as higher provisions are worrisome. Also, its continued decline in fee income is a concern.
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
BankUnited (BKU - Free Report) is scheduled to announce its second-quarter 2023 results on Jul 25.
Over the past 60 days, the Zacks Consensus Estimate for BKU’s quarterly earnings has moved up 2.6% to 79 cents per share. The estimate indicates a 3.7% decrease from the prior-year quarter.
Truist Financial Corporation (TFC - Free Report) is slated to release its second-quarter 2023 numbers on Jul 20.
Over the past seven days, the Zacks Consensus Estimate for TFC’s quarterly earnings has moved down 3% to 98 cents per share. The figure implies an 18.3% decrease from the prior-year quarter.