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PNC Financial (PNC) Displays Organic Growth: Time to Hold?

On Mar 30, we issued an updated research report on The PNC Financial Services Group, Inc. PNC. The company has been benefiting from strong capital position, improving revenues and strategic initiatives. However, significant exposure to commercial loans, along with rising expenses, is a concern.

PNC Financial remains committed toward developing its business through strategic initiatives. In the past few years, the company has expanded the middle-market franchise and continues to build its technology platform in order to serve clients better. Moreover, the company has strengthened its advisory services. Notably, it plans to extend the reach of the middle-market corporate banking franchise into newer markets, and expand its retail banking brand nationally.

With one of the most attractive business mixes in the banking industry, PNC Financial continues to make steady progress toward bolstering its top line. With the gradual change in the rate environment, margin pressure for the bank has eased, though was down in 2019 due to three Fed interest-rate cuts. Further, the company’s fee income depicted upward movement, with a four-year CAGR (2016-2019) of 5.1%.

PNC Financial stands solid from the balance-sheet perspective. Notably, loans and deposits have witnessed a five-year CAGR (2015-2019) of 3.8% and 3.7%, respectively. Management remains particularly focused on improving its consumer deposits, as these are Liquidity Coverage Ratio-friendly and more elastic to fluctuations in price.

However, PNC Financial’s expenses flared up at a four-year CAGR (2016-2019) of 3.7%, with a marginal drop in 2018. Higher levels of business activity, along with investments in technology and business infrastructure, contributed to this upside. Though the company aims to fund part of its investments through continued improvement-savings program goals ($300 million for 2020) that target cost containment, a rising expense base is likely to keep eroding the bottom line in the near term.

Additionally, the company’s loan portfolio consists of nearly 67% of commercial loans. Such high exposure to commercial loans depicts lack of diversification, which can be risky amid challenging economy and competitive markets.

The Zacks Consensus Estimate for its current-year and next-year earnings moved down over the past 30 days, reflecting analysts’ lack of optimism regarding the stock’s earnings growth potential. Currently, PNC Financial carries a Zacks Rank #3 (Hold).

Shares of this banking giant have recorded a year-to-date decline of 43.2% compared with the 44.8% decrease recorded by the industry.



Key Picks from the Sector

Northrim BanCorp Inc NRIM has witnessed upward earnings estimate revisions for 2020 over the past 90 days. Also, this Zacks #2 Ranked (Buy) stock has lost 38.3% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

First Western Financial, Inc. MYFW ongoing-year earnings estimate moved up in the past 90 days. Further, the company’s shares have declined 15.3% over the past six months. At present, it sports a Zacks Rank of 1.

Flushing Financial Corporation FFIC current-year earnings estimate moved north in 90 days’ time.  Additionally, the stock has depreciated 41.5% over the past six months. It currently carries a Zacks Rank #2.

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The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report
 
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Flushing Financial Corporation (FFIC): Free Stock Analysis Report
 
First Western Financial, Inc. (MYFW): Free Stock Analysis Report
 
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