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PNC Financial (PNC) Q3 Earnings Surpass on Lower Expenses

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Shares of The PNC Financial Services Group, Inc. (PNC - Free Report) have rallied 1.5% since the third-quarter 2023 earnings release. The bank reported third-quarter 2023 earnings per share of $3.60, which surpassed the Zacks Consensus Estimate of $3.18. The outperformance was aided by a fall in non-interest expenses and lower provisions.

Lower Expenses Fuel Bottom-Line Growth

Non-interest expenses totaled $3.25 billion, decreasing 1.1% from the year-ago figure, reflecting the company’s ongoing focus on expense management. Particularly,     personnel expenses of $1.77 billion declined 2% year over year due to lower variable compensation expenses, whereas other expenses dipped 1% to $788 million. Occupancy and equipment expenses increased 1%, respectively, to $244 million and $347 million year over year.  

As part of cost-containment measures, the company has undertaken a continuous improvement program to reduce cost reduction by $450 million in 2023.

Moreover, in October 2023, PNC conducted an enterprise-wide review of the organizational structure to implement workforce reduction. The company has reduced its headcount by 4%, which will reduce personnel expenses by $325 million in 2024. Nonetheless, PNC will incur a one-time charge of $150 million in fourth-quarter 2023.

Revenue Decline Dampens Growth

However, the bottom line reflects a 4.8% year-over-year dip on a revenue decline. Notably, total quarterly revenues were $5.23 billion, down 5.7% year over year. The top line missed the Zacks Consensus Estimate of $5.31 billion. Declines in net interest income (NII) and fee income affected the top line.

Quarterly NII was $3.42 billion, which declined 1.6% from the year-ago quarter, whereas non-interest income fell 12.5% year over year to $1.82 billion. The fee income decline was due to a fall in almost all fee income components, except for card and cash management fees, lending and deposit services fees, and residential and commercial mortgage fees.

4Q23 Outlook

The outlook is relative to the third quarter. The company expects average loans to be up 3% in the quarter. Management anticipates NII to decline 1-2%. Non-interest income is expected to rise 1%. Other non-interest income is projected to be up $150-$200 million.

Non-interest expenses are expected to rise 3-4%. Net charge-offs are estimated between $200 million and 250 million.

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

Webster Financial (WBS - Free Report) is scheduled to announce its third-quarter 2023 results on Oct 19.

Over the past week, the Zacks Consensus Estimate for WBS’s quarterly earnings has moved marginally up to $1.50 per share. The estimate indicates a 2.7% increase from the year-ago quarter’s reported figure.

Texas Capital Bancshares (TCBI - Free Report) is slated to release its third-quarter 2023 numbers on Oct 19.

Over the past seven days, the Zacks Consensus Estimate for TCBI’s quarterly earnings has risen nearly 1% to $1.03 per share. The figure implies a 39.2% increase from the prior-year quarter’s reported number.

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