What Helped PNC Financial Command Premium Valuations in 4Q16?

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What Helped PNC Financial Command Premium Valuations in 4Q16? PART 1 OF 5

What to Expect from PNC Financial’s 4Q16 Earnings

4Q16 expectations

PNC Financial Services (PNC) is expected to post earnings per share (or EPS) of $1.84 in 4Q16, lower than its EPS of $1.87 in 4Q15 and in line with its EPS in 2Q16.

For the full year, the company is expected to post EPS of $7.18 on $15 billion in revenue. PNC is expected to see an improved 2017 on the back of interest income led by a rise in interest rates. As the broader markets improve, the company could also see improved non-interest income.

What to Expect from PNC Financial&#8217;s 4Q16 Earnings

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PNC Financial beat analysts’ consensus EPS estimate of $1.78, posting EPS of $1.84 in 3Q16. On a year-over-year basis, its net income fell to $1 billion, compared to $1.1 billion in the prior year’s quarter, but sequentially, its net income rose on improved non-interest income backed by a stable macroeconomic landscape.

PNC Financial saw strength in its earnings on the back of revenue growth, expense management, rising loans and deposits, and an improved balance sheet. The company’s total revenue rose 1% to $3.8 billion, aided by net interest income of $27 million and non-interest income growth of $8 million. It saw a rise in its non-interest expenses, mainly due to a new FDIC (Federal Deposit Insurance Corporation) deposit insurance surcharge.

Banking, services

PNC Financial is engaged in retail, corporate, and institutional banking in the United States. The company also provides asset management and mortgage banking services. On September 30, 2016, its total assets, deposits, and shareholders’ equity stood at $369 billion, $260 billion, and $42 billion, respectively. PNC Financial holds a 21.7% stake in BlackRock (BLK), and it generates 12% of its net income.

JPMorgan Chase (JPM) beat estimates in 3Q16. It has a weight of 8.1% in the Financial Select Sector SPDR ETF (XLF). Some of the company’s major competitors include Bank of America (BAC) and Citigroup (C).

In this series, we’ll study PNC’s expected rise in interest income, its non-interest income, its expansion strategy, its capital position, its dividends, and its valuations.


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