On Nov 22, 2013, we reiterated our long-term recommendation on
PNC Financial Services Group, Inc.
) at Neutral, based on its strong third-quarter earnings and
prudent expense management. However, stringent regulations and a
slow economic recovery might be deterrents to the company's
PNC Financial reported third-quarter 2013 earnings per share of
$1.79, which outpaced the Zacks Consensus Estimate of $1.61.
Moreover, this compared favorably with $1.64 earned in the
Better-than-expected results benefited from fall in operating
expenses and provision for credit losses. Further, enhanced
credit quality and healthy capital ratios were the positives.
However, lower revenues mainly due to fall net interest income
and non-interest income is a concern.
We are encouraged by PNC Financial's opportunistic acquisitions
since 2008, which are expected to boost revenues. 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 mitigate any negative impact from
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 are
expected to boost investors' confidence in the stock.
On the flip side, decline in net interest income and net interest
margin due to reduced purchase accounting accretion as well as
lower yields on loans and securities remain challenges.
Additionally, a protracted economic recovery and stricter
regulatory requirements might weigh on the company's expansion
plans going forward.
For PNC Financial, the Zacks Consensus Estimate for 2013 nudged
up 0.1% to $7.17 per share in the last 30 days. Moreover, for
2014, the Zacks Consensus Estimate rose 0.1% to $6.94 per share
over the same time frame. Thus, the company currently carries a
Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked regional banks include
BofI Holding, Inc.
) and KeyCorp. (
). While BofI Holding and Preferred Bank have a Zacks Rank #1
(Strong Buy), KeyCorp holds a Zacks Rank #2 (Buy).
BOFI HLDG INC (BOFI): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
PREFERRED BANK (PFBC): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
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