On Aug 29, 2013, we reiterated our long-term recommendation on
The PNC Financial Services Group, Inc
) at Neutral, based on its second-quarter earnings and expense
reduction initiatives. However, stringent regulations and a slow
economic recovery might act as deterrents to the company's
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PNC Financial reported second-quarter 2013 earnings of $1.99 per
share, which outpaced the Zacks Consensus Estimate of $1.64.
Moreover, this compared favorably with 98 cents earned in the
Better-than-expected results were aided by growth in non-interest
income and a decline in operating expenses, partially offset by a
fall in net interest income. Further, enhanced credit quality was
another positive, but capital ratios were a mixed bag.
PNC Financial has been on an acquisition spree since 2008. The
company completed the acquisition of National City in 2008 and
the retail banking franchise of Flagstar Bank in 2011. Moreover,
in Mar 2012, the company completed the purchase of RBC Bank (USA)
and expanded its footprint in the Southeast markets.
Further, PNC Financial's focus on expense control and efficient
management has enabled it to offset continued investments in
distribution channels. Moreover, PNC Financial's strong balance
sheet position and its ability to consistently pay dividend even
during the financial crisis is expected to boost investors'
confidence in the stock.
However, a decline in net interest income and net interest margin
due to reduced purchase accounting accretion and lower yields on
loans and securities remain concerns. Additionally, the slow
recovery of macroeconomic environment along with stricter
regulatory requirements might restrict the company's future
For PNC Financial, the Zacks Consensus Estimate for 2013 went up
by 4.8% to $7.02 per share in the last 60 days. Moreover, for
2014, the Zacks Consensus Estimate went up by 0.9% to $6.95 per
share over the same time frame. The company currently carries a
Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other banks that are performing well include
First Interstate Bancsystem Inc
). All these carry a Zacks Rank #1 (Strong Buy).