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PNC Financial (PNC) Q3 Earnings Top Estimates on High Revenues

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PNC Financial (PNC - Free Report) reported positive earnings surprise of 5% in third-quarter 2019. Earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.80. Further, the bottom line reflects a 4.3% jump from the prior-year quarter’s reported figure.

Higher revenues, driven by higher net interest income and escalating fee income, aided the company’s results. However, rise in costs and provisions were headwinds.

The company’s net income for the quarter came in at $1.39 billion compared with the prior-year quarter’s $1.4 billion.

Segment wise, on a year-over-year basis, quarterly net income at the Corporate & Institutional Banking and Retail banking increased marginally and 52.2%, respectively. However, the Other, including the BlackRock and Asset Management Group segments, reported 25.5% and 16.4% fall in net income, respectively.

High Revenues Recorded, Partly Muted by Elevated Costs

Total revenues for the reported quarter came in at $4.49 billion, climbing 3% year over year. Additionally, the top-line figure surpassed the Zacks Consensus Estimate of $4.40 billion.    

Net interest income jumped 2% from the year-ago quarter to $2.5 billion. Increased loan and securities balances, along with elevated loan yields, were partly mitigated by growth in deposit costs and borrowing and deposit balances. Yet, net interest margin contracted 15 basis points to 2.84% as elevated deposit costs were partially muted by increase in loan yields.

Non-interest income was up 5% year over year to $1.99 billion owing to higher consumer and corporate services income, residential mortgage and other income, partially offset by lower income from asset management and service charges on deposits.

PNC Financial’s non-interest expenses totaled $2.62 billion, flaring up 1% from the year-ago figure. This surge primarily stemmed from rise in almost all components of expenses, partly offset by lower other and personnel costs.

As of Sep 30, 2019, total loans were up slightly sequentially to $237.4 billion. Also, total deposits improved 5% to $285.6 billion.

Credit Quality: A Concern

Credit metrics deteriorated in the third quarter. Non-performing assets were up 1% to $1.85 billion, year over year. Further, net charge-offs surged 70% to $155 million.

Provision for credit losses more than doubled from the prior-year quarter to $183 million. In addition, allowance for loan and lease losses was up 6% to $2.7 billion.

Steady Capital Position

As of Sep 30, 2019, the Basel III common equity Tier 1 capital ratio, effective Jan 1, 2018, was 9.6% compared with 9.3% as of Sep 30, 2018.

Share Repurchase

During the July-September quarter, PNC Financial repurchased 7.5 million common shares for $1 billion. Furthermore, dividends of $0.5 billion were distributed.

Our Viewpoint

PNC Financial displayed an impressive performance during the September-end quarter. Improving lending scenario is likely to support its top line in the upcoming period. Moreover, 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. Rise in expenses and provisions, nevertheless, remain concerns.

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 Major Banks

Goldman Sachs’ (GS - Free Report) third-quarter 2019 results posted a negative earnings surprise of 4.8%. The company reported earnings per share of $4.79, missing the Zacks Consensus Estimate of $5.03. Further, the bottom-line figure compares unfavorably with earnings of $6.28 per share recorded in the year-earlier quarter.

Wells Fargo’s (WFC - Free Report) third-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of $1.15 on lower net interest income. The figure also comes in lower than the prior-year quarter earnings of $1.13 per share.  Results include discrete litigation accrual (not tax-deductible) worth 35 cents per share, and gain from the sale of Institutional Retirement and Trust (IRT) business worth 20 cents. Also, the partial redemption of Series K Preferred Stock decreased earnings by 5 cents.

Citigroup (C - Free Report) delivered a positive earnings surprise of 1% in the third quarter, backed by improved investment banking performance. Adjusted earnings per share of $1.98 outpaced the Zacks Consensus Estimate of $1.96. Also, earnings climbed 20% year over year.

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