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Key Factors to Affect PNC Financial (PNC) in Q3 Earnings
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The PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report its third-quarter 2023 earnings before the opening bell on Oct 13. The company’s revenues and earnings are expected to have witnessed year-over-year declines.
In the last reported quarter, its 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 0.93%, on average.
The PNC Financial Services Group, Inc Price and EPS Surprise
PNC’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 $3.28 has moved marginally downward in the past week, reflecting the bearish sentiments of analysts. Further, the figure indicates a 15.6% dip from the year-ago reported number.
Also, the consensus estimate for revenues is pegged at $5.33 billion, suggesting year-over-year fall of 3.9%. Management expects the top line to be up approximately 1% sequentially.
Now, let’s discuss factors likely to have impacted PNC Financial’s third-quarter performance.
Loans and NII: The pace of loan growthare likely to have moderated in the quarter under review, as the challenging macroeconomic backdrop and high-interest rates affected consumer spending. Demand for commercial and industrial loans remained muted in July and August, per Fed’s latest data. Moreover, commercial real estate loans declined in July and August from the second-quarter end. Nonetheless, consumer loans were stable in August from the second-quarter 2023 end.
Given PNC’s high exposure to total commercial loans (nearly 68% as of Jun 30, 2023), the company is expected to have seen a decline in its lending book during the quarter. Accordingly, management expects average loans to decrease 1% sequentially during the quarter.
Such a tumble in lending activities is likely to affect NII in the quarter under review. Further, in July 2023, Fed raised interest rates by 25 basis points to a target of 5.25-5.5%, marking the 11th time FOMC has hiked interest rates in a tightening process that began in March 2022. Interest rate was the highest in around 22 years.
A rise in rates is likely to have inflated funding costs. This is expected to have adversely impacted NII to some extent as interest rates continued to remain high.
Management projects NII to decrease 3-4% sequentially. The Zacks Consensus Estimate for NII (on a fully taxable-equivalent or FTE basis) of $3.41 billion indicates a sequential decline of 3.6%. We predict 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 $707 million suggests a sequential increase of 1.4%.
The consensus estimate of $355 million for asset management and brokerage revenues implies a marginal rise sequentially.
Merger and acquisition activities continued to be depressed in the third quarter, with total deal value declining from the prior year. High interest rates, increased antitrust scrutiny, fears of a global recession and looming U.S. federal government shutdown 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 negatively impacted. Nonetheless, the Zacks Consensus Estimate for the same of $227 million indicates 6.6% growth sequentially.
In the third quarter, mortgage rates continued to ascend, with the rate on a 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. 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. Nonetheless, improvement in mortgage servicing rights valuation is likely to have offered support. The Zacks Consensus Estimate for the same of $131 million suggests a rise of 33.7% sequentially.
Overall, management envisions fee income to jump 10-11% sequentially. The Zacks Consensus Estimate for non-interest income is pegged at $1.92 billion, suggesting an 8% increase sequentially. Our estimate for the metric is pegged at $1.96 billion.
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 expected to have limited bottom-line growth in the third quarter. Nonetheless, its focus on cost-containment measures is likely to have reduced expenses to some extent, offering support.
Management predicts non-interest expenses to be sequentially stable. Our estimate for the metric is pegged at $3.38 billion, indicating a sequential gain of 0.3%.
Asset Quality: PNC Financial is expected to have set aside substantial money for potential bad loans, given expectations of a worsening macroeconomic outlook, growing recession risk, slower GDP growth and the likelihood of deteriorating employment conditions. Nonetheless, with credit cost normalizing, modest reserve built during the quarter is expected to have weighed on PNC’s bottom-line growth. Our estimate for provision for credit losses is pegged at $245.6 million for the third quarter.
The Zacks Consensus Estimate for non-performing loans of $2.17 billion implies a 13.4% increase sequentially.
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 +1.60%.
Zacks Rank: PNC currently carries a Zacks Rank of 3.
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 this season.
The Earnings ESP for FCNCA is +3.95% and currently sports a Zacks Rank #1 (Strong Buy). It is slated to report third-quarter 2023 results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s third-quarter earnings has moved marginally north over the past 30 days.
MTB is scheduled to release third-quarter 2023 results on Oct 18. It currently has an Earnings ESP of +2.61% and a Zacks Rank #3.
The Zacks Consensus Estimate for MTB’s third-quarter earnings has moved marginally north over the past week.
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Key Factors to Affect PNC Financial (PNC) in Q3 Earnings
The PNC Financial Services Group, Inc. (PNC - Free Report) is scheduled to report its third-quarter 2023 earnings before the opening bell on Oct 13. The company’s revenues and earnings are expected to have witnessed year-over-year declines.
In the last reported quarter, its 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 0.93%, 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
PNC’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 $3.28 has moved marginally downward in the past week, reflecting the bearish sentiments of analysts. Further, the figure indicates a 15.6% dip from the year-ago reported number.
Also, the consensus estimate for revenues is pegged at $5.33 billion, suggesting year-over-year fall of 3.9%. Management expects the top line to be up approximately 1% sequentially.
Now, let’s discuss factors likely to have impacted PNC Financial’s third-quarter performance.
Loans and NII: The pace of loan growthare likely to have moderated in the quarter under review, as the challenging macroeconomic backdrop and high-interest rates affected consumer spending. Demand for commercial and industrial loans remained muted in July and August, per Fed’s latest data. Moreover, commercial real estate loans declined in July and August from the second-quarter end. Nonetheless, consumer loans were stable in August from the second-quarter 2023 end.
Given PNC’s high exposure to total commercial loans (nearly 68% as of Jun 30, 2023), the company is expected to have seen a decline in its lending book during the quarter. Accordingly, management expects average loans to decrease 1% sequentially during the quarter.
Such a tumble in lending activities is likely to affect NII in the quarter under review. Further, in July 2023, Fed raised interest rates by 25 basis points to a target of 5.25-5.5%, marking the 11th time FOMC has hiked interest rates in a tightening process that began in March 2022. Interest rate was the highest in around 22 years.
A rise in rates is likely to have inflated funding costs. This is expected to have adversely impacted NII to some extent as interest rates continued to remain high.
Management projects NII to decrease 3-4% sequentially. The Zacks Consensus Estimate for NII (on a fully taxable-equivalent or FTE basis) of $3.41 billion indicates a sequential decline of 3.6%. We predict 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 $707 million suggests a sequential increase of 1.4%.
The consensus estimate of $355 million for asset management and brokerage revenues implies a marginal rise sequentially.
Merger and acquisition activities continued to be depressed in the third quarter, with total deal value declining from the prior year. High interest rates, increased antitrust scrutiny, fears of a global recession and looming U.S. federal government shutdown 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 negatively impacted. Nonetheless, the Zacks Consensus Estimate for the same of $227 million indicates 6.6% growth sequentially.
In the third quarter, mortgage rates continued to ascend, with the rate on a 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. 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. Nonetheless, improvement in mortgage servicing rights valuation is likely to have offered support. The Zacks Consensus Estimate for the same of $131 million suggests a rise of 33.7% sequentially.
Overall, management envisions fee income to jump 10-11% sequentially. The Zacks Consensus Estimate for non-interest income is pegged at $1.92 billion, suggesting an 8% increase sequentially. Our estimate for the metric is pegged at $1.96 billion.
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 expected to have limited bottom-line growth in the third quarter. Nonetheless, its focus on cost-containment measures is likely to have reduced expenses to some extent, offering support.
Management predicts non-interest expenses to be sequentially stable. Our estimate for the metric is pegged at $3.38 billion, indicating a sequential gain of 0.3%.
Asset Quality: PNC Financial is expected to have set aside substantial money for potential bad loans, given expectations of a worsening macroeconomic outlook, growing recession risk, slower GDP growth and the likelihood of deteriorating employment conditions. Nonetheless, with credit cost normalizing, modest reserve built during the quarter is expected to have weighed on PNC’s bottom-line growth. Our estimate for provision for credit losses is pegged at $245.6 million for the third quarter.
The Zacks Consensus Estimate for non-performing loans of $2.17 billion implies a 13.4% increase sequentially.
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 +1.60%.
Zacks Rank: PNC currently carries a Zacks Rank of 3.
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 this season.
The Earnings ESP for FCNCA is +3.95% and currently sports a Zacks Rank #1 (Strong Buy). It is slated to report third-quarter 2023 results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FCNCA’s third-quarter earnings has moved marginally north over the past 30 days.
MTB is scheduled to release third-quarter 2023 results on Oct 18. It currently has an Earnings ESP of +2.61% and a Zacks Rank #3.
The Zacks Consensus Estimate for MTB’s third-quarter earnings has moved marginally north over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.