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PNC Financial Stock Gains 26.8% in 6 Months: Should You Buy for 2025?
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The PNC Financial Services Group, Inc. (PNC - Free Report) shares have gained 26.8% in the past six months, outperforming the industry’s growth of 21.6%. The stock has also outperformed its close peers like Bank of America Corporation (BAC - Free Report) and Citigroup Inc. (C - Free Report) in the same time frame.
Six-Month Price Performance
Image Source: Zacks Investment Research
After such a strong rally, investors are left wondering whether they should buy the PNC stock now or wait for a better entry point. Let us find out.
What’s Aiding PNC’s Performance?
Fed’s Interest Rate Cuts: One of the key reasons behind PNC Financial’s rally could be attributed to the Federal Reserve's decision to lower interest rates. The Fed started cutting interest rates in September 2024 and lowered interest rates by 100 basis points, with the latest cut on Dec.18, 2024. This, along with future rate cuts, is expected to boost loan demand and gradually stabilize funding costs. Hence, these measures will likely support PNC’s net interest income (NII) and margin growth in the upcoming period.
Management anticipates NII to rise 1% in the fourth quarter from the $3.4 billion reported in the third quarter of 2024.
Donald Trump's election in 2024 and his expected expansionary economic policies, including tax cuts and deregulation, are expected to support banks.
Footprint Expansion Efforts: PNC’s efforts to expand its footprint across the United States through branch openings and renovating existing branches will solidify its position as one of the largest retail banks in the country. Over the next five years, the bank is set to open more than 200 branches across 12 cities, including Austin, Dallas, Denver, Houston, Miami and San Antonio, while renovating 1,400 existing locations.
Similarly, BAC has embarked on an ambitious expansion plan to open financial centers in new and existing markets. By 2026, the company plans to open more than 165 financial centers.
Solid Loan & Deposit Balances: PNC Financial benefits from a strong balance sheet position. Total deposits and loans have witnessed a four-year (2019-2023) CAGR of 9.9% and 7.6%, respectively. Although the loan balance declined in the first nine months of 2024, the deposit balance continued to grow in the same period.
PNC expects average loans to be stable in the fourth quarter of 2024 compared with the third quarter’s reported figure of $319.6 billion.
Strategic Partnerships: PNC Financial has been committed to strengthening its business through collaborations. In September 2024, the bank partnered with Plaid through a bilateral data access agreement, allowing PNC customers across the United States to securely share their financial data with various financial applications.
In May 2024, the bank extended its partnership with TCW Group to offer private credit solutions to middle-market companies. It aims to raise $2.5 billion in investor equity capital for investment in its first year. This partnership will allow PNC Financial to gain a significant share of the expanding private credit market.
Through such planned partnerships, the bank is likely to benefit from a stronger foothold in the growing fintech industry, positioning itself for long-term growth.
Robust Liquidity Position: PNC Financial enjoys a decent liquidity position. As of Sept. 30, 2024, the company’s total available liquidity (comprising cash and due from banks, and interest-earning deposits in banks) was $41.2 billion. It had total borrowed funds of $68.7 billion as of the same date.
PNC’s focus on maintaining a strong capital position will support its capital distribution activities. As of Sept. 30, 2024, the company’s capital ratios were well above the regulatory requirements, with a Common Equity Tier 1 ratio and a total capital risk-based ratio of 10.3% and 13.6%, respectively.
The company also rewards its shareholders handsomely. It hiked its dividend by 3.2% to $1.60 per share in July 2024. PNC increased its dividend four times in the past five years, with five-year annualized dividend growth of 9.07%.
The PNC Financial Services Group, Inc Dividend Yield (TTM)
Likewise, BAC and C increased their dividends in July 2024. Bank of America raised its quarterly dividend by 8.3% to 26 cents per share, while Citigroup hiked its quarterly dividend by 6% to 56 cents per share.
Apart from a steady dividend payout, PNC has a share repurchase program. A 100 million share repurchase plan was authorized in the second quarter of 2022. In the first nine months of 2024, the company repurchased 0.3 billion of its common shares under its share repurchase program. As of Sept. 30, 2024, 42.6 million shares were available for repurchase under the authorization.
Steadily rising non-interest expenses are concerning for PNC. The company’s non-interest expenses have witnessed a four-year (2019-2023) CAGR of 7.3%. Also, non-interest expenses increased year over year in the first nine months of 2024.
The expense base is likely to be elevated due to its ongoing investments in technological advancements and branch expansion efforts.
Management expects adjusted non-interest expenses to increase 2-3% in the fourth quarter from the $3.3 billion reported in the third quarter of 2024.
Expense Growth Trend
Image Source: Zacks Investment Research
Bullish Analyst Sentiments on PNC
Over the past month, the Zacks Consensus Estimate for earnings of $13.49 and $14.83 per share for 2024 and 2025, respectively, has moved marginally upward.
Estimate Revision Trend
Image Source: Zacks Investment Research
The projected figures imply a decline of 4.3% for 2024 and subsequent growth of 9.9% for 2025.
Parting Thoughts on PNC Financial
Rate cuts, efforts to expand footprints through branch expansion and a solid balance sheet position are likely to support PNC Financial. Additionally, Donald Trump’s potential expansionary moves will complement the bank’s growth initiatives. However, an elevated expense base is a near-term concern.
Image: Bigstock
PNC Financial Stock Gains 26.8% in 6 Months: Should You Buy for 2025?
The PNC Financial Services Group, Inc. (PNC - Free Report) shares have gained 26.8% in the past six months, outperforming the industry’s growth of 21.6%. The stock has also outperformed its close peers like Bank of America Corporation (BAC - Free Report) and Citigroup Inc. (C - Free Report) in the same time frame.
Six-Month Price Performance
Image Source: Zacks Investment Research
After such a strong rally, investors are left wondering whether they should buy the PNC stock now or wait for a better entry point. Let us find out.
What’s Aiding PNC’s Performance?
Fed’s Interest Rate Cuts: One of the key reasons behind PNC Financial’s rally could be attributed to the Federal Reserve's decision to lower interest rates. The Fed started cutting interest rates in September 2024 and lowered interest rates by 100 basis points, with the latest cut on Dec.18, 2024. This, along with future rate cuts, is expected to boost loan demand and gradually stabilize funding costs. Hence, these measures will likely support PNC’s net interest income (NII) and margin growth in the upcoming period.
Management anticipates NII to rise 1% in the fourth quarter from the $3.4 billion reported in the third quarter of 2024.
Donald Trump's election in 2024 and his expected expansionary economic policies, including tax cuts and deregulation, are expected to support banks.
Footprint Expansion Efforts: PNC’s efforts to expand its footprint across the United States through branch openings and renovating existing branches will solidify its position as one of the largest retail banks in the country. Over the next five years, the bank is set to open more than 200 branches across 12 cities, including Austin, Dallas, Denver, Houston, Miami and San Antonio, while renovating 1,400 existing locations.
Similarly, BAC has embarked on an ambitious expansion plan to open financial centers in new and existing markets. By 2026, the company plans to open more than 165 financial centers.
Solid Loan & Deposit Balances: PNC Financial benefits from a strong balance sheet position. Total deposits and loans have witnessed a four-year (2019-2023) CAGR of 9.9% and 7.6%, respectively. Although the loan balance declined in the first nine months of 2024, the deposit balance continued to grow in the same period.
PNC expects average loans to be stable in the fourth quarter of 2024 compared with the third quarter’s reported figure of $319.6 billion.
Strategic Partnerships: PNC Financial has been committed to strengthening its business through collaborations. In September 2024, the bank partnered with Plaid through a bilateral data access agreement, allowing PNC customers across the United States to securely share their financial data with various financial applications.
In May 2024, the bank extended its partnership with TCW Group to offer private credit solutions to middle-market companies. It aims to raise $2.5 billion in investor equity capital for investment in its first year. This partnership will allow PNC Financial to gain a significant share of the expanding private credit market.
Through such planned partnerships, the bank is likely to benefit from a stronger foothold in the growing fintech industry, positioning itself for long-term growth.
Robust Liquidity Position: PNC Financial enjoys a decent liquidity position. As of Sept. 30, 2024, the company’s total available liquidity (comprising cash and due from banks, and interest-earning deposits in banks) was $41.2 billion. It had total borrowed funds of $68.7 billion as of the same date.
PNC’s focus on maintaining a strong capital position will support its capital distribution activities. As of Sept. 30, 2024, the company’s capital ratios were well above the regulatory requirements, with a Common Equity Tier 1 ratio and a total capital risk-based ratio of 10.3% and 13.6%, respectively.
The company also rewards its shareholders handsomely. It hiked its dividend by 3.2% to $1.60 per share in July 2024. PNC increased its dividend four times in the past five years, with five-year annualized dividend growth of 9.07%.
The PNC Financial Services Group, Inc Dividend Yield (TTM)
The PNC Financial Services Group, Inc dividend-yield-ttm | The PNC Financial Services Group, Inc Quote
Likewise, BAC and C increased their dividends in July 2024. Bank of America raised its quarterly dividend by 8.3% to 26 cents per share, while Citigroup hiked its quarterly dividend by 6% to 56 cents per share.
Apart from a steady dividend payout, PNC has a share repurchase program. A 100 million share repurchase plan was authorized in the second quarter of 2022. In the first nine months of 2024, the company repurchased 0.3 billion of its common shares under its share repurchase program. As of Sept. 30, 2024, 42.6 million shares were available for repurchase under the authorization.
Elevated Expenses Challenge PNC Financial's Growth
Steadily rising non-interest expenses are concerning for PNC. The company’s non-interest expenses have witnessed a four-year (2019-2023) CAGR of 7.3%. Also, non-interest expenses increased year over year in the first nine months of 2024.
The expense base is likely to be elevated due to its ongoing investments in technological advancements and branch expansion efforts.
Management expects adjusted non-interest expenses to increase 2-3% in the fourth quarter from the $3.3 billion reported in the third quarter of 2024.
Expense Growth Trend
Image Source: Zacks Investment Research
Bullish Analyst Sentiments on PNC
Over the past month, the Zacks Consensus Estimate for earnings of $13.49 and $14.83 per share for 2024 and 2025, respectively, has moved marginally upward.
Estimate Revision Trend
Image Source: Zacks Investment Research
The projected figures imply a decline of 4.3% for 2024 and subsequent growth of 9.9% for 2025.
Parting Thoughts on PNC Financial
Rate cuts, efforts to expand footprints through branch expansion and a solid balance sheet position are likely to support PNC Financial. Additionally, Donald Trump’s potential expansionary moves will complement the bank’s growth initiatives. However, an elevated expense base is a near-term concern.
Hence, we advise investors not to rush to buy PNC; instead, keep this Zacks Rank #3 (Hold) stock on their radars and wait for an attractive entry point. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.