PNC Financial Surpasses 4Q Street Estimates, Shares Decline

PNC Financial Services Group reported better-than-expected 4Q results on Friday, driven by higher deposits and loans. However, lower revenues and a decline in net interest margin led to a 3.5% drop in its stock.

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PNC Financial’s (PNC) 4Q earnings of $3.26 per share grew 34.2% year-over-year and came in ahead of analysts’ estimates of $2.54. Its 4Q revenue of $4.21 billion declined 2.6% from the year-ago period but exceeded the Street’s $4.13 billion call.

Average deposits grew 25% year-over-year, and the net interest margin stood at 2.32% as of Dec. 31, 2020, versus 2.78% as of Dec. 31, 2019. The decrease reflects lower loan yields. Provision recapture was $254 million in the fourth quarter of 2020, compared to a provision for credit losses of $221 million in the year-ago quarter. (See PNC stock analysis on TipRanks)

Meanwhile, on Nov. 16, PNC agreed to acquire BBVA USA Bancshares, Inc. from Spanish financial group BBVA S.A. for about $11.6 billion in cash. PNC Financial has sold its equity stake in BlackRock to finance the transaction. The deal, which is expected to close in mid-2021, will increase PNC’s total assets by about $102 billion, making it the fifth-largest bank by assets. It will also expand the bank’s presence in 29 of the 30 largest US markets.

Following the 4Q results, Raymond James analyst Michael Rose maintained a Hold rating on the stock. In a note to investors, the analyst said, “Looking ahead, its outlook calls for flat revenue (+fee revenues, -NII) and noninterest expenses in 2021 on a standalone basis inclusive of $300 million of savings from its continuous improvement program (CIP). However, the potential for deposit growth and further steepening of the yield curve could drive PTPPI [pre-tax, pre-provision income] growth/positive operating leverage.”

From the rest of the Street, the stock scores a cautiously optimistic outlook, with the analyst consensus of a Moderate Buy based on 4 Buys and 11 Holds. The average analyst price target of $154.46 implies that shares are fully priced at current levels. Shares have gained 1.6% in the last year.