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PNC Financial (PNC) Beats Q1 Earnings Estimates, Revenues Up

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The PNC Financial Services Group (PNC - Free Report) reported first-quarter 2018 earnings per share of $2.43 beating the Zacks Consensus Estimate by a penny. Moreover, the bottom line reflected a 24% increase from the prior-year quarter.

Continued easing of pressure on net interest margin helped the company earn higher net interest income during the quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth. However, higher expenses hurt results to some extent. Further, the results were partially offset by higher provisions. The company’s net income for the quarter was $1.24 billion, up 15.4% from the prior-year quarter.

Segment wise, on a year-over-year basis, quarterly net income at Corporate & Institutional Banking and Asset Management improved 20.1% and 44.7%, respectively. Also, net income for the Retail Banking segment increased 3.6%. However, Other, including the BlackRock segment’s net income declined 11.8% from the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Total revenues for the quarter came in at $4.11 billion, rising 6% year over year. However, the reported figure lagged the Zacks Consensus Estimate of $4.15 billion.

Net interest income was up 9% year over year to $2.36 billion. Also, net interest margin increased 14 basis points to 2.91%.

Non-interest income was up 2% year over year to $1.75 billion, driven by higher asset management income, consumer services income, service charges on deposits and other income, partially offset by lower income from residential mortgage.

PNC Financial’s non-interest expenses were $2.53 billion, increasing 5% from the year-ago quarter. The rise was primarily due to higher personnel costs.

As of Mar 31, 2018, total loans rose 1% sequentially to $221.6 billion. However, total deposits declined slightly to $264.7 billion.

Credit Quality: A Mixed Bag

Allowance for loan and lease losses increased 2% year over year to $2.60 billion. Also, provision for credit losses was $92 million, up 5% from $88 million in the prior-year quarter.

However, non-performing assets declined 9% to $2 billion. Further, net charge-offs came down 4% year over year to $113 million.

Capital Position Weakens

As of Mar 31, 2018, the Basel III common equity Tier 1 capital ratio, which became effective Jan 1, 2018, was 9.6% compared with 9.8% at Dec 31, 2017.

Share Repurchase

In the first quarter, PNC Financial repurchased 4.8 million common shares for $0.7 billion. Also, dividends of $0.4 billion were distributed.

Our Viewpoint

PNC Financial is well positioned to grow based on its diverse revenue mix. Margin improvement, due to rising interest rates, along with improving lending scenario are likely to continue supporting its top line. The company remains on track to execute its strategic goals, including technology initiatives and the expansion of middle market franchise into new markets.

The PNC Financial Services Group, Inc Price, Consensus and EPS Surprise

PNC Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other Wall Street giants, Comerica (CMA - Free Report) and State Street Corporation (STT - Free Report) are scheduled to report first-quarter 2018 earnings on Apr 17 and Apr 20, respectively, while Bank of America Corporation (BAC - Free Report) will report on Apr 16.

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