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PNC Financial Services: What Impacted Its 2Q16 Earnings?

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PNC beats estimates

PNC Financial Services (PNC) reported its 2Q16 earnings on July 15, 2016, and managed to beat analysts’ estimates. It reported net income of $989 million, or $1.82 per diluted common share. Analysts had estimated $1.76 per diluted common share. On a year-over-year basis, net income declined 5%, mainly due to global uncertainty.

Estimates

Compared with the first quarter of 2016, there was a rise in fee income and non-interest expenses, driven by business activity, a lower provision for credit losses, and growth in average loans and deposits. The stock has fallen 5% over the past six months on macro factors such as a slowing global economy and the declining value of asset classes. The company is expected to benefit from rising interest rates in 2016, which are expected to boost its investment income and interest margins.

In a company press release on July 15, 2016, PNC chairman and CEO William S. Demchak stated that “We had a good second quarter against a backdrop of global uncertainty. We grew fee income, along with average loans and deposits, and we announced plans to return additional capital to our shareholders in the coming year. In the wake of the Brexit vote, as lower interest rates weigh on future performance, we remain focused on executing against our strategic priorities to create long-term shareholder value without compromising our risk profile or balance sheet.”

Diversified financial services

PNC Financial is engaged in retail, corporate, and institutional banking in the United States. The company provides asset management and mortgage banking services, among others. As of March 31, 2015, its total assets, total deposits, and shareholders’ equity stood at $351 billion, $236.5 billion, and $45 billion, respectively. PNC Financial holds a 21.7% stake in BlackRock (BLK) and generates 12% of its net income.

JPMorgan Chase (JPM) beat the estimates by 7% in the first quarter of 2016. It has a weight of 8.1% in the Financial Select Sector SPDR ETF (XLF). Other major competitors reporting earnings this week include Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS).

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