News

The PNC Financial Services Group, Inc. PNC is scheduled to report its second-quarter 2024 earnings on Jul 16, before the opening bell. The bank’s second-quarter 2024 revenues are expected to have improved from the year-ago reported level, while earnings are expected to have declined.

In the last reported quarter, its earnings outpaced the Zacks Consensus Estimate due to a rise in deposit balances and an improvement in the company’s credit quality. However, an increase in non-interest expenses and lower net interest income (NII) were headwinds.

Notably, PNC Financial has a decent earnings surprise history. It surpassed estimates in each of the trailing four quarters, delivering an earnings surprise of 7.29%, on average.

Now, let us discuss factors that are likely to have impacted PNC Financial’s second-quarter performance.

The PNC Financial Services Group, Inc Price and EPS Surprise

The PNC Financial Services Group, Inc price-eps-surprise | The PNC Financial Services Group, Inc Quote

Loans and NII: Banks’ lending activities have improved in the second quarter of 2024 as the economy starts recovering from persistent inflationary pressures boosting consumer spending. Further, the expectations of Fed easing interest rates later this year are likely to have offered support to the lending scenario. Per the Fed’s latest data, the demand for commercial and industrial, real estate, and consumer loans was decent in the first two months of the quarter.

As the Federal Reserve kept the interest rates steady during the quarter at a 22-year high of 5.25-5.5%, PNC is less likely to have recorded significant improvement in NII. Also, the inverted yield curve in the June-ended quarter and high funding costs are expected to have weighed on NII growth.

The company expects average loans to remain stable from the first quarter of 2024. Management anticipates NII to decline 1% sequentially. The Zacks Consensus Estimate for NII (on a fully taxable-equivalent or FTE basis) of $3.26 billion indicates a sequential decline of 1%.

Non-Interest Revenues: Owing to the uncertainty of the macroeconomic condition, consumer card transactions and spending volumes decreased, which are likely to have hindered PNC’s card fees in the quarter under review. The Zacks Consensus Estimate for card and cash management revenues of $691 million suggests a sequential fall of nearly 1%.

In the second quarter, the mortgage rates are expected to have declined from the peak of more than 8% but remained considerably high at almost 7%. Though the central bank has signaled a 25-basis point cut in rates this year, the demand for mortgages did not witness significant improvement in the second quarter of 2024. Due to the home price appreciation and lower supply, mortgage origination volume remained weak too. Yet, supported by lower rates, there was a modest rise in refinancing activities.

Thus, these factors are expected to have positively impacted PNC Financial’s residential and commercial mortgage revenues. The Zacks Consensus Estimate for the same is pegged at $149 million, indicating a rise of 1.4% sequentially.

Merger and acquisition activities are likely to have witnessed a rebound in the second quarter, with total deal value rising from the prior year. Also, green shoots were observed in the capital markets and issuance activities. Thus, the company’s capital markets and advisory revenues are likely to have improved. The Zacks Consensus Estimate for the same is pegged at $261.4 million, indicating 22.7% growth sequentially.

Overall, management envisions fee income to rise 1-2% sequentially. The Zacks Consensus Estimate for non-interest income is pegged at $1.96 billion, suggesting a 4.3% increase sequentially. Our estimate for the metric is pegged at $1.88 billion.

Expenses: PNC’s investment in technology and franchise, along with general inflationary pressures, are likely to have inflated costs. Such a rise in expenses is expected to have limited bottom-line growth in the second quarter. Nonetheless, its focus on cost-containment measures and staff reductions is likely to have reduced expenses to some extent, offering support.

Management predicts adjusted non-interest expenses to sequentially rise 2-4%. Our estimate for the metric is pegged at $3.34 billion, indicating a marginal sequential rise.

Asset Quality: PNC Financial is expected to have set aside substantial money for potential bad loans, given the expectations of an economic slowdown. With credit cost normalizing, modest reserve built during the quarter is expected to have weighed on PNC’s bottom-line growth. Our estimate for provision for credit losses is pegged at $203 million for the second quarter.

Management expects net charge-offs between $225 million and $275 million for the June-end quarter.

What the Zacks Model Reveals

Our proven model does not predict an earnings beat for PNC Financial this time around. This is because it does not have the right combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) to increase the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: PNC Financial has an Earnings ESP of -1.13%.

Zacks Rank: PNC currently carries a Zacks Rank of 3.

PNC’s activities in the to-be-reported quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings of $3 has remained unchanged in the past seven days, reflecting the bearish sentiments of analysts. Further, the figure indicates a 10.7% dip from the year-ago reported number.

The consensus estimate for revenues for the quarter under review is pegged at $5.30 billion, suggesting year-over-year growth of 0.2%

The Zacks Consensus Estimate for 2024 earnings is pegged at $12.65, suggesting a decrease of 10.3% from the prior year’s reported figure. The Zacks Consensus Estimate for 2024 revenues is pegged at $21.27 billion, suggesting a fall of 1% from the prior year’s reported figure.

Stocks That Warrant a Look

Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

The Earnings ESP for JPMorgan Chase & Co. JPM is +0.57% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2024 results on Jul 12.

Over the past seven days, the Zacks Consensus Estimate for JPM’s quarterly earnings has moved marginally upward.

M&T Bank Corporation MTB has an Earnings ESP of +0.50% and carries a Zacks Rank #3 at present. It is scheduled to release second-quarter 2024 earnings on Jul 18. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MTB’s quarterly earnings estimates have moved marginally downward over the past seven days.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.

This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report

The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report

M&T Bank Corporation (MTB) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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