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Is PNC Financial Poised to Reflect Cost Control Further?

On Sep 25, 2015, we issued an updated research report on The PNC Financial Services Group, Inc.PNC . Shares of this Pennsylvania-based banking giant have recorded a one-year return of 6.8%. Moreover, PNC Financial has outpaced the Zacks Consensus Estimate in the last four trailing quarters, with an average beat of 4.75%.

We believe this growth story has been aided by the company's efforts to drive operational efficiency. Also, it continues to benefit from steady loan and deposit growth; and continues to enhance shareholder value with dividend and buybacks.

We believe PNC Financial is well positioned to drive operational efficiency through its cost containment efforts. Management increased its full-year continuous improvement savings program ("CIP") goal by $100 million to $500 million in July 2015. As a result of this, expenses are likely to remain stable sequentially in the third quarter; and decline approximately 1% for full-year 2015 relative to 2014.

With one of the most attractive business mixes in the banking industry, PNC Financial continues to make steady progress toward improving its top line. Though the low rate environment is challenging for net interest income (NII) growth, the company's fee income has depicted upward movement. Notably, fee income grew 6% year over year in the first six months of 2015.

Additionally, driven by a strong capital position the company remains committed to enhance shareholder value. Following the Federal Reserve's approval of its 2015 capital plan, the company announced a 6% hike in its quarterly dividend in April 2015. The capital plan also includes a new share repurchase authorization to buy back shares worth nearly $2.875 billion.

However, litigation issues and the prevailing stringent regulatory landscape will continue to mar PNC Financial's growth. Also, with interest rates not expected to rise significantly in the near term, management anticipates a challenging environment for revenue in the second half of 2015.

Over the past 30 days, the Zacks Consensus Estimate declined slightly to $7.27 per share for 2015. For 2016, it remained stable at $7.77 per share. Hence, PNC Financial carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better-ranked stocks in the finance space include SunTrust Banks, Inc. STI , Wells Fargo & Company WFC and Middleburg Financial Corporation MBRG . All three carry a Zacks Rank #2 (Buy).

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PNC FINL SVC CP (PNC): Free Stock Analysis Report

SUNTRUST BKS (STI): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

MIDDLEBURG FINL (MBRG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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