Back to top

Image: Bigstock

PNC Financial (PNC) Q4 Earnings Lag Estimates, Revenues Up

Read MoreHide Full Article

PNC Financial (PNC - Free Report) reported fourth-quarter 2018 earnings per share of $2.75, which lagged the Zacks Consensus Estimate of $2.77. However, the bottom line reflected a 20.1% jump from the prior-year quarter, on an adjusted basis.

Shares of PNC Financial declined 1.3% in pre-market trading session due to year-over-year decline in non-interest income. Also, higher provisions posed another headwind. However, decline in costs supported results to some extent. Also, continued easing of pressure on net interest margin led to higher net interest income during the reported quarter.

The company’s net income for the quarter came in at $1.4 billion compared with $2.1 billion in the prior-year quarter.

For 2018, net income was approximately $5.4 billion or $10.71 per share compared with $5.4 billion or $10.36 reported in 2017.

Segment wise, on a year-over-year basis, quarterly net income at Corporate & Institutional Banking and Asset Management Group declined 32.2% and 27.6%, respectively. Also, net income for Other, including the BlackRock segment, decreased 70.7%. However, Retail Banking segment reported income of $313 million against loss of $105 million in year-ago quarter.

High Net Interest Income & Low Costs Offset by Fall in Fee Income

For full-year 2018, the company reported revenues of $17.13 billion, up 4.9% on a year-over-year basis. The figure slightly lagged the Zacks Consensus Estimate of $17.17 billion.

Total revenues for the quarter came in at $4.34 billion, climbing 1.9% year over year. However, the top line came below the Zacks Consensus Estimate of $4.38 billion.    

Net interest income jumped 6% from the year-ago quarter to $2.48 billion. Elevated loan, and securities yields and balances were partly mitigated by growth in deposit and borrowing costs. Additionally, net interest margin expanded 8 basis points to 2.96%.

Non-interest income was down 3% year over year to $1.86 billion due to lower income from asset management, partially offset by higher consumer services income, residential mortgage, corporate services and service charges on deposits.

PNC Financial’s non-interest expenses totaled $2.6 billion, down 16% from the year-ago figure. The decline primarily stemmed from lower personnel, occupancy and other costs.

As of Dec 31, 2018, total loans inched up nearly 3% year over year to $226.2 billion. Also, total deposits improved 1% to $267.9 billion.

Credit Quality: A Mixed Bag

Non-performing assets declined 11% to $1.81 billion, year over year. Further, net charge-offs fell 13% to $107 million.

However, provision for credit losses was $148 million, up 18% from $125 million reported in the prior-year quarter. Also, allowance for loan and lease losses increased 1% to $2.6 billion.

Capital Position Weakens

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

Share Repurchase

In the fourth quarter, PNC Financial repurchased 6.1 million common shares for $0.8 billion. Also, dividends of $0.4 billion were distributed.

Our Viewpoint

PNC Financial reported disappointing performance this season. Decline in non-interest income due to lower earnings from the equity investment in BlackRock came as a headwind. Also, weakening capital position was a concern.

However, increase in margins, owing to rising interest rates, along with improving lending scenario, are likely to support its top line, moving ahead. Also, the company is well poised to grow on the back of its diverse revenue mix. It remains on track to execute its strategic goals, including technology initiatives, which bodes well for the long term.

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.

Performance of Other Banks

Citigroup (C - Free Report) delivered a positive earnings surprise of 3.9% in fourth-quarter 2018, backed by expense control and lower cost of credit. Adjusted net income per share of $1.61 for the quarter handily outpaced the Zacks Consensus Estimate of $1.55. Also, adjusted earnings climbed 26% year over year.

Dismal fixed income trading and underwriting business performance affected JPMorgan’s (JPM - Free Report) fourth-quarter 2018 earnings of $1.98 per share, which lagged the Zacks Consensus Estimate of $2.20. However, the figure surged 85% from the prior-year quarter.

Backed by lower expenses, Wells Fargo (WFC - Free Report) delivered a positive earnings surprise of 3.4% in fourth-quarter 2018. Earnings of $1.21 per share surpassed the Zacks Consensus Estimate of $1.17. Also, the bottom-line compared favorably with $1.16 recorded in the prior-year quarter.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Published in