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PNC Financial (PNC) Q2 Earnings Beat Estimates, Revenues Up


Riding on high revenues, The PNC Financial Services Group PNC delivered a positive earnings surprise of 5.4% in second-quarter 2018. Earnings per share of $2.72 beat the Zacks Consensus Estimate of $2.58. Moreover, the bottom line reflected a 30% increase from the prior-year quarter.

Shares of PNC Financial climbed more than 1% in pre-market trading reflecting investors’ optimism on continued easing of pressure on net interest margin that led to higher net interest income during the quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth. Lower provisions remained another tailwind.

However, higher expenses hurt results to some extent. Also, weakening of capital position was a headwind.

The company’s net income for the quarter was $1.26 billion, up 23.6% from the prior-year quarter.

Segment wise, on a year-over-year basis, quarterly net income at Corporate & Institutional Banking and Retail Banking improved 30.3% and 43.5%, respectively. Also, net income for Other, including the BlackRock segment increased 1.7%.

However, Asset Management Group’s net income declined 5.8% from the prior-year quarter.

Revenue Growth Offsets Higher Expenses

Total revenues for the quarter came in at $4.32 billion, rising 6.5% year over year. Also, the reported figure outpaced the Zacks Consensus Estimate of $4.25 billion.

Net interest income jumped 6.9% from the year-ago quarter to $2.41 billion. Also, net interest margin increased 12 basis points to 2.96%.

Non-interest income was up 6% year over year to $1.91 billion, driven by higher asset management income, consumer services income, corporate services and other income, partially offset by lower income from residential mortgage.

PNC Financial’s non-interest expenses were $2.58 billion, increasing 4.2% from the year-ago quarter. The rise was primarily due to higher personnel and marketing-related costs.

As of Jun 30, 2018, total loans rose nearly 1% sequentially to $222.8 billion. Also, total deposits improved slightly to $264.9 billion.

Credit Quality Improves

Provision for credit losses was $80 million, down 18.4% from $98 million in the prior-year quarter. Also, non-performing assets declined 13.9% to $1.85 billion. Further, net charge-offs fell 1% year over year to $109 million.

Capital Position Weakens

As of Jun 30, 2018, the Basel III common equity Tier 1 capital ratio, which became effective Jan 1, 2018, was 9.5% compared with 9.8% at Jun 30, 2017.

Share Repurchase

In the second quarter, PNC Financial repurchased 5.7 million common shares for $0.8 billion. Also, dividends of $0.4 billion were distributed.

Our Viewpoint

PNC Financial reported strong results this time around also. Increase in margins, due to rising interest rates, along with improving lending scenario are likely to continue supporting its top line. Further, improvement in credit quality keeps us encouraged.

PNC Financial is well positioned to grow based on its diverse revenue mix. Also, the company remains on track to execute its strategic goals, including technology initiatives, that bode well for the long term.

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

PNC Financial currently 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 and State Street Corporation STT are scheduled to report second-quarter 2018 earnings on Jul 17 and Jul 20, respectively, while Bank of America Corporation BAC will report on Jul 16.

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