Price to Book Value ratio most common valuation metric
The most common metric used for valuing PNC Bank (PNC) is its Price to Book Value ratio (or PBV). It is simple, intuitive, and widely used. Historical analysis and back testing studies also indicate this metric to be reasonably reliable for valuing banks. Market Realist offers additional information about the Price to Book Value ratio .
PNC trades at multiples close to historical mean
PNC Bank has seen its stock rerated in line with the market movement. The stock was trading at a PBV ratio of 0.75 in November 2012. Since then, the stock has seen a smart move up. Since late 2012, the book value of the company has increased because of the bank’s good financial performance. The stock has simultaneously been rerated. Now, the stock trades at a PBV multiple of close to 1.08.
PNC Bank was an average performer in 2014
PNC Bank was a market performer in the last year and returned 14.56%, which was nearly equal to the returns of the S&P 500 Tracking SPDR S&P 500 ETF (SPY). It was also similar to the returns of the broad Financial Select Sector SPDR ETF (XLF). PNC underperformed Wells Fargo (WFC) and outperformed US Bank (USB) in 2014. Market Realist offers a detailed look at how Wells Fargo outperforms PNC Bank.
Future performance depend on improving weak spots
PNC Bank’s ongoing performance will depend on its financial performance and how it improves its shortcomings while maintaining its strengths. It will also depend on some strategic initiatives that the bank is taking, which will help the bank become stronger in the long run. We will cover these strategic initiatives in a coming series of articles.